Some Tests of the Efficiency of the Emerging Financial Markets

Sardar M.N. Islam, Sethapong Watanapalachaikul and Colin Clark
Additional contact information
Sardar M.N. Islam: Sardar M.N. Islam, Centre for Strategic Economic Studies, Victoria University, Melbourne. E–mail: Sardar.Islam@vu.edu.au
Sethapong Watanapalachaikul: Sethapong Watanapalachaikul, Centre for Strategic Economic Studies, Victoria University, Melbourne. E–mail: sethapong@hotmail.com
Colin Clark: Colin Clark, Faculty of Business and Law, Victoria University, Melbourne. E–mail: colin.clark@vu.edu.au

Journal of Emerging Market Finance, 2007, vol. 6, issue 3, 291-302

Abstract: Efficient Market Hypothesis (EMH) has attracted a considerable number of studies in empirical finance, particularly in determining the market efficiency of an emerging financial market. Conflicting and inconclusive outcomes have been generated by various existing studies in EMH. In addition, efficiency tests in the emerging financial markets are rarely definitive in reaching a conclusion about the issue. This article proposes a theory–free paradigm of non–parametric tests of market efficiency for an emerging stock market, the Thai stock market, consisting of two tests—run–test and autocorrelation function tests (ACF)—to establish a more definitive conclusion about EMH in emerging financial markets. The result of this research demonstrates that an autocorrelation on Thai stock market returns exists particularly during the post–crisis period. The inefficiency of the Thai stock market follows on from the violation of the necessary conditions for an efficient market with a developed financial system and also implies financial and institutional imperfections.

Keywords: JEL Classification: G10; Market efficiency; emerging financial markets; Thai stock market (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:6:y:2007:i:3:p:291-302

DOI: 10.1177/097265270700600304

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