Stock Market Efficiency in Developing Economies

Ronit Mukherji
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Ronit Mukherji: The author is a Research Associate at the Indian Statistical Institute, New Delhi, India. email: ronit.mukherji1992@gmail.com

Margin: The Journal of Applied Economic Research, 2015, vol. 9, issue 4, 402-429

Abstract: This article analyses the degree of stock market efficiency in three emerging economies— India, China and Brazil. It tests to see if US stock returns have an influence on endogenous stock returns, even after controlling for domestic macroeconomic variables. A country-specific vector auto-regression model is used to test the short-run effects and the fully modified ordinary least square procedure has been used to find the long-run relationship, thus checking for degree of efficiency in these stock markets. The results indicate that, despite controlling for key domestic stock return determinants, US stock returns have a significant positive relationship with the stock returns of all three countries. JEL Classification: G15, C32, C34

Keywords: Emerging Market Economies; Vector Auto-regression; Panel Cointegration; Fully Modified Ordinary Least Square (FMOLS); Dynamic Ordinary Least Square (DOLS) (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:sae:mareco:v:9:y:2015:i:4:p:402-429

DOI: 10.1177/0973801015598058

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