Testing the weak-form efficiency of stock markets. Issue 3 (20th July 2015)

• Record Type: Journal Article
• Authors: Nwachukwu, Jacinta Chikaodi; Shitta, Omowunmi
• Is Part Of: International journal of emerging markets. Volume 10:Issue 3(2015)
• Page Start: 409
• Page End: 426
• Publication Date: 2015-07-20
• Subjects: Business enterprises -- Finance -- Periodicals; Investments -- Developing countries -- Periodicals; Commerce -- Periodicals; Developing countries -- Economic conditions -- Periodicals; 330.91724
• DOI: 10.1108/IJoEM-07-2013-0115
• Languages: English
• ISSNs: 1746-8809

Abstract

<abstract> <title> <x content-type="archive" xml:space="preserve">Abstract</x> </title> <sec> <title content-type="abstract-heading">Purpose</title> <p> – The purpose of this paper is to focus on the weak-form efficiency of 24 emerging and nine industrial stock market indices around the world. It tests for the predictability and the presence of seasonal patterns in rates of return from January 2000 to December 2010. </p> </sec> <sec> <title content-type="abstract-heading">Design/methodology/approach</title> <p> – It reports on the descriptive statistics for estimated monthly percentage returns. This is complemented by the use of both parametric and non-parametric techniques to test for abnormal return behaviour in stock markets. </p> </sec> <sec> <title content-type="abstract-heading">Findings</title> <p> – The results show that: first, emerging economies which persisted with market-oriented reforms had higher returns relative to risk, indicating their attractiveness for risk diversification; second, successive changes in stock prices were interrelated with each other and therefore contained information for predicting future prices in two-thirds of the emerging markets compared to one-third of industrial economies; and third, the turn-of-the calendar year effect was present for half of the emerging markets <italic>vis-à-vis</italic> one-quarter of the developed countries. The authors found limited support for the tax-loss selling hypothesis for both the emerging and industrial economies. </p> </sec> <sec> <title content-type="abstract-heading">Research limitations/implications</title> <p> – The paper fails to specifically analyse the implications for security returns of changes in technology, institutions, volume of trading and regulations in the different stock markets. </p> </sec> <sec> <title content-type="abstract-heading">Practical implications</title> <p> – The results should be particularly informative for foreign investors with regard to the risk diversification benefits of the various emerging and industrialised stock markets and the expected risk-return trade-offs. </p> </sec> <sec> <title content-type="abstract-heading">Originality/value</title> <p> – The paper provides a more powerful explanation for the role of institutional arrangements, infrastructure, culture and other country-specific risk factors in asset pricing compared to disparate case studies.</p> </sec> </abstract>