THE EFFICIENCY OF EMERGING STOCK MARKETS: EVIDENCE FROM ASIA AND AFRICA

Abdelmoneim Youssef and Giuseppe Galloppo

Global Journal of Business Research, 2013, vol. 7, issue 4, 1-17

Abstract: This paper examines the efficiency in pricing securities as well as the relation between exchange rate and dynamics of equity returns in a number of emerging stock markets from Africa and Asia,. This study utilizes methodologies based on Single variance ratio test of Lo and Mackinlay (1988), multiple variance tests of Chow and Denning (1993), individual variance test based on ranks and signs of Wright (2000), Wild bootstrap test of Chow and Denning introduced by Kim (2006), and joint version of sign test of Wright by Kim and Shamsuddin (2008). Results shows that Egyptian, Moroccan and Indian exchanges are not in conformity with the Random Walk Hypothesis, RWH, from the perspective of both local and international investors. Whereas the first two markets are considered inefficient in pricing equities, from the perspective of both local and international investors, when monthly returns are employed. The Indian market supports that testing for RWH is sensitive to the frequency of data used. It is worth mentioning that empirical results demonstrate also insensitivity of testing of RWH to exchange rate changes. The main significance of our study is the use of the latest test methodologies in analyzing an investment area that is growing in the emerging stock markets.

Keywords: Emerging Markets; Variance Ratio Test; Wild Bootstrap; Conditional Heteroskedasticity. (search for similar items in EconPapers)
JEL-codes: G12 G13 G14 G15 (search for similar items in EconPapers)
Date: 2013
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