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Weak-form market efficiency in European emerging and developed stock markets

  • Andrew C. Worthington
  • Helen Higgs

This paper tests for random walks and weak-form market efficiency in European equity markets. Daily returns for sixteen developed markets (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom) and four emerging markets (Czech Republic, Hungary, Poland and Russia) are examined for random walks using a combination of serial correlation coefficient and runs tests, Augmented Dickey-Fuller (ADF), Phillips-Perron (PP) and Kwiatkowski, Phillips, Schmidt and Shin (KPSS) unit root tests and multiple variance ratio (MVR) tests. The results, which are in broad agreement across the approaches employed, indicate that of the emerging markets only Hungary is characterized by a random walk and hence is weak-form efficient, while in the developed markets only Germany, Ireland, Portugal, Sweden and the United Kingdom comply with the most stringent random walk criteria.

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File URL: http://external-apps.qut.edu.au/business/documents/discussionPapers/2003/DP%20159%20Worthington%20&%20Higgs.pdf
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Paper provided by School of Economics and Finance, Queensland University of Technology in its series School of Economics and Finance Discussion Papers and Working Papers Series with number 159.

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Date of creation: 20 Sep 2003
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Handle: RePEc:qut:dpaper:159
Contact details of provider: Postal: GPO Box 2434, BRISBANE QLD 4001
Web page: http://www.bus.qut.edu.au/faculty/economics/
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  1. Karemera, David & Ojah, Kalu & Cole, John A, 1999. " Random Walks and Market Efficiency Tests: Evidence from Emerging Equity Markets," Review of Quantitative Finance and Accounting, Springer, vol. 13(2), pages 171-88, September.
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  3. Buguk, Cumhur & Wade Brorsen, B., 2003. "Testing weak-form market efficiency: Evidence from the Istanbul Stock Exchange," International Review of Financial Analysis, Elsevier, vol. 12(5), pages 579-590.
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  11. Marta Regulez & Ainhoa Zarraga, 2002. "Common features between stock returns and trading volume," Applied Financial Economics, Taylor & Francis Journals, vol. 12(12), pages 885-893.
  12. Appiah-Kusi, Joe & Menyah, Kojo, 2003. "Return predictability in African stock markets," Review of Financial Economics, Elsevier, vol. 12(3), pages 247-270.
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  14. Grieb, Terrance & Reyes, Mario G, 1999. "Random Walk Tests for Latin American Equity Indexes and Individual Firms," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 22(4), pages 371-83, Winter.
  15. Hiroyuki Kawakatsu & Matthew R. Morey, 1999. "An Empirical Examination Of Financial Liberalization And The Efficiency Of Emerging Market Stock Prices," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 22(4), pages 385-411, December.
  16. Kwong-C. Cheung & J. Andrew Coutts, 2001. "A note on weak form market efficiency in security prices: evidence from the Hong Kong stock exchange," Applied Economics Letters, Taylor & Francis Journals, vol. 8(6), pages 407-410.
  17. Nicolaas Groenewold & Mohamed Ariff, 1998. "The Effects of De-Regulation on Share-Market Efficiency in the Asia-Pacific," International Economic Journal, Taylor & Francis Journals, vol. 12(4), pages 23-47.
  18. Abraham Abraham, 2002. "Testing the Random Walk Behavior and Efficiency of the Gulf Stock Markets," The Financial Review, Eastern Finance Association, vol. 37(3), pages 469-480, 08.
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