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An Alternative Definition of Market Efficiency and some Comments on its Empirical Testing

Author

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  • Alexandros E. Milionis

    () (Bank of Greece)

Abstract

An alternative definition for market efficiency, based on econometric rather than financial arguments is suggested. It is argued that this new definition, though equivalent to the existing one, has some comparative advantages. Moreover, the conditions under which the results from the application of some commonly used methods for the empirical testing of market efficiency are meaningful are examined, and guidelines for practitioners are suggested. Further, market efficiency is examined in a time-varying risk framework.

Suggested Citation

  • Alexandros E. Milionis, 2006. "An Alternative Definition of Market Efficiency and some Comments on its Empirical Testing," Working Papers 50, Bank of Greece.
  • Handle: RePEc:bog:wpaper:50
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Market efficiency; Return predictability; Serial correlation in stock returns; Market efficiency in the presence of conditional heteroscedasticity;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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