Is the sovereign debt market efficient? Evidence from the US and German sovereign debt markets
Bachar Fakhry and
Christian Richter ()
International Economics and Economic Policy, 2015, vol. 12, issue 3, 339-357
This paper analyses the efficient market hypothesis. It proposes a new method of testing the efficient market hypothesis based on the idea of Shiller ( 1979 ). Using a GARCH model, we test whether the excess volatility in the German and US sovereign debt markets is an indication of inefficient markets during different periods. The results indicate that omitting structural breaks may lead to wrong results. We find that although both debts were efficient during some periods and inefficient during other periods of time. Taking all periods together the financial markets appear to be inefficient. Hence, the general outcome was that both financial markets are not efficient markets. Copyright Springer-Verlag Berlin Heidelberg 2015
Keywords: Shiller volatility test; Efficient market hypothesis; Neoclassical economics; Bounded rationality; Applied econometrics; C2; C5; F3; G14; G15 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:iecepo:v:12:y:2015:i:3:p:339-357
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