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Testing the Weak-Form Informational Efficiency of United Kingdom, United States of America and Japan’s Capital Markets

Author

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  • Otilia SARAMAT

    (West University of Timişoara, Faculty of Economics and Business Administration, Timişoara, Romania)

  • Bogdan DIMA

    (West University of Timişoara, Faculty of Economics and Business Administration, Timişoara, Romania)

Abstract

This paper examines the weak form of informational efficiency for of three major capital markets, namely United Kingdom, United States of America and Japan. Results are obtained for DJI, FTSE 100 and NIKKEI 225 indexes, over a span time from 1995 to 2010. Our analysis uses the so called Lo-MacKinlay (1988) Variance Ratio Tests and some unit root tests in order to estimate if this indexes evolve as random walk processes. First we have considered that the Hurst exponent series were random walks so that variances were computed for differences of the data, second we assumed that these series follow an exponential random walk so that the innovations are obtained by taking log differences, and third the series contains the random walk innovations themselves. The results suggest that the Hurst exponent for the prices series can not be described as random walk processes. The unit root analysis suggest that overall, the trend stationarity hypothesis can be rejected in the favour of unit root with drift processes. We conclude that the adjustmenst procese son this markets can not be described accordingly to the postulates of weak informationally efficientcy hypothesis.

Suggested Citation

  • Otilia SARAMAT & Bogdan DIMA, 2011. "Testing the Weak-Form Informational Efficiency of United Kingdom, United States of America and Japan’s Capital Markets," Timisoara Journal of Economics, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 4(2(14)), pages 111-122.
  • Handle: RePEc:wun:journl:tje:v04:y2011:i2(14):a05
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    Cited by:

    1. Camelia Oprean, 2012. "Testing the financial market informational efficiency in emerging states," Review of Applied Socio-Economic Research, Pro Global Science Association, vol. 4(2), pages 181-190, Decembre.

    More about this item

    Keywords

    informational efficiency; random-walk; Efficient Market Hypothesis; Adaptive Market Hypothesis;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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