Nonlinearity in emerging market indices: A comprehensive study of stock exchange market dynamics

Jamilu Babangida

Applied Econometrics, 2023, vol. 72, 23-37

Abstract: This research examines the presence of nonlinearities in N-11 developing economies using various nonlinearity tests. The initial tests include BDS and Runs tests as indicators of nonlinearity. Subsequently, direct nonlinearity tests by White (1989) and Teräsvirta et al. (1993), Keenan (1985) and Tsay (1986) are employed. Finally, the Threshold Autoregressive test is conducted to complement other test. The results reveal the prevalence of nonlinearities and cyclical patterns in the stock indexes of these economies, challenging the assumptions of the Efficient Market Hypothesis (EMH).

Keywords: efficient market hypothesis; emerging economies; stock exchange market; nonlinearity; threshold model (search for similar items in EconPapers)
JEL-codes: C22 C52 C58 (search for similar items in EconPapers)
Date: 2023
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