Short-term market efficiency indicator based on the waiting-time distribution

Syed Mujahid Hussain (), Sergey Osmekhin and Frédéric Délèze
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Syed Mujahid Hussain: Sultan Qaboos University
Sergey Osmekhin: Hanken School of Economics
Frédéric Délèze: Hanken School of Economics

Review of Managerial Science, 2021, vol. 15, issue 6, No 4, 1572 pages

Abstract: Abstract This paper presents a quantitative approach to measure market efficiency based on the waiting-time distribution. We use the spread between two classes of ordinary shares of Royal Dutch Shell Plc, and two listings of Australia and New Zealand Banking Group Limited to observe market inefficient states. We find that the parameter of the waiting-time distribution provides a quantitative measure of the market inefficiency and can be used as a short-term market efficiency indicator. This approach can be applied to liquid financial markets and has clear implications for the investors, hedgers, regulators and policymakers.

Keywords: Market efficiency indicator; Market inefficiency; Statistical arbitrage; Waiting-time distribution (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s11846-020-00398-w

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