How much random does European Union walk? A time-varying long memory analysis

Ahmet Sensoy and Benjamin Tabak

No 342, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: This paper proposes a new efficiency index to model time-varying inefficiency in stock markets. We focus on European stock markets and show that they have different degrees of time-varying efficiency. We observe that the 2008 global financial crisis has had an adverse effect on almost all EU stock markets. However, the Eurozone sovereign debt crisis has had a significant adverse effect only on the markets in France, Spain and Greece. For the late members, joining EU does not have a uniform effect on stock market efficiency. Our results have important implications for policy makers, investors, risk managers and academics.

Date: 2013-12
New Economics Papers: this item is included in nep-eec and nep-ets
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