Testing capital market efficiency

Christophe Boya

Global Business and Economics Review, 2017, vol. 19, issue 2, 194-224

Abstract: This paper reviews the main tools to test the hypothesis of efficient market. We divide into two categories. First, we examine tests for return predictability. We expose random walk tests through variance ratios and the presence of long memory. Furthermore, we develop this part by including the imperfections of the market such as calendar anomalies and the trading volume. Then, we present event studies and different t tests employed in the field. We complete with the analysis of an information flow by presenting the non-parametric model and the test statistic. We also display empirical results from the literature for each category studied. Conclusions show that event studies question the efficiency contrary to tests for return predictability.

Keywords: efficient market hypothesis; return predictability tests; random walk hypothesis; event studies; abnormal returns; capital market efficiency; capital markets; variance ratios; long memory; calendar anomalies; trading volume; information flow. (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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Journal Article: Information & efficience: 40 ans de recherche (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ids:gbusec:v:19:y:2017:i:2:p:194-224

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