A Study on the Level of Market Efficiency in five countries

Guoxi Duan () and Hisashi Tanizaki
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Guoxi Duan: Graduate School of Economics, Osaka University

No 21-24, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper examine the weak form market efficiency in five stock markets, China (CSI 300 index), Hong Kong (HSI), Japan (Nikkei 225), the US (NASDAQCOM) and Germany (DAX) from the perspective of random walk hypothesis. The methods for testing random walk are autocorrelation, runs test, strategy. This paper also examine three calendar effects in all stock market: January effect, the-turn-of-the-month effect (the TOM effect), the day-of-the-week-effect (the DOW effect). The results are: (1)From the viewpoint of autocorrelation, the most efficient market among five stock markets is the market in Hong Kong while strong evidence of autocorrelation is found in China, CSI 300 and The US, NASDAQCOM. (2) The results of runs tests do not found evidence against randomness in daily returns for CSI 300, HSI from 2006 to 2020 but find a little evidence for Nikkei 225, NASDAQCOM, DAX. The higher level of efficient markets among five stock markets are the markets in China and Hong Kong. (3) The strategy analyzed in this paper does not find evidence indicating inefficient market for five indexes. (4) January effect did not exist in five indexes. (5) All five indexes are characterized with a TOM effect in different level and therefore the hypothesis of an efficient market is rejected for five markets. (6) All five indexed are found the-day-of-week effect which also indicates inefficient stock markets. we conclude that all five market are not efficient from 2006 to 2020.

Keywords: market efficiency hypothesis; random walk; January effect; the-turn-of-the-month effect; the day-of-the-week-effect (search for similar items in EconPapers)
JEL-codes: C22 G10 G14 (search for similar items in EconPapers)
Pages: 24pages
Date: 2021-12, Revised 2021-12
New Economics Papers: this item is included in nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:2124

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