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Market capitalization and efficiency. Does it matter? Evidence from the Athens Stock Exchange

  • Theodore Panagiotidis

The efficient market hypothesis (EMH) is tested in the case of the Athens Stock Exchange (ASE) after the introduction of the euro for three different indices. The underlying assumption is that stock prices would be more transparent; their performance easier to compare; the exchange rate risk eliminated and as a result we expect the new currency to strengthen the argument in favour of the EMH. The FTSE/ASE20, which consists of 'high capitalization' companies, the FTSE/ASE Mid 40, which consists of medium sized companies and the FTSE/ASE Small Cap, which covers the next 80 companies, are used. Five statistical tests are employed to test the residuals of the random walk model: the BDS, McLeod-Li, Engle LM, Tsay and Bicovariance test. Bootstrap as well as asymptotic values of these tests are estimated. The random walk hypothesis is rejected in all three cases and alternative GARCH models are estimated.

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Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 15 (2005)
Issue (Month): 10 ()
Pages: 707-713

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Handle: RePEc:taf:apfiec:v:15:y:2005:i:10:p:707-713
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  1. John Barkoulas & Nickolaos Travlos, 1998. "Chaos in an emerging capital market? The case of the Athens Stock Exchange," Applied Financial Economics, Taylor & Francis Journals, vol. 8(3), pages 231-243.
  2. repec:att:wimass:9520 is not listed on IDEAS
  3. Brooks, Chris & Henry, Olan T., 2000. "Can portmanteau nonlinearity tests serve as general mis-specification tests?: Evidence from symmetric and asymmetric GARCH models," Economics Letters, Elsevier, vol. 67(3), pages 245-251, June.
  4. Gregorios Siourounis, 2002. "Modelling volatility and testing for efficiency in emerging capital markets: the case of the Athens stock exchange," Applied Financial Economics, Taylor & Francis Journals, vol. 12(1), pages 47-55.
  5. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
  6. Nicholas Apergis & Sophia Eleptheriou, 2001. "Stock returns and volatility: Evidence from the Athens Stock market index," Journal of Economics and Finance, Springer, vol. 25(1), pages 50-61, March.
  7. Brooks, Chris & Heravi, Saeed M, 1999. "The Effect of (Mis-Specified) GARCH Filters on the Finite Sample Distribution of the BDS Test," Computational Economics, Society for Computational Economics, vol. 13(2), pages 147-62, April.
  8. Theodore Panagiotidis, 2002. "Testing the assumption of Linearity," Economics Bulletin, AccessEcon, vol. 3(29), pages 1-9.
  9. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
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