The evolution of stock market efficiency in the US: a non-Bayesian time-varying model approach

Mikio Ito, Akihiko Noda and Tatsuma Wada

Applied Economics, 2016, vol. 48, issue 7, 621-635

Abstract: A non-Bayesian time-varying model is developed by introducing the concept of the degree of market efficiency that varies over time. This model may be seen as a reflection of the idea that continuous technological progress alters the trading environment over time. With new methodologies and a new measure of the degree of market efficiency, we examine whether the US stock market evolves over time. In particular, a time-varying autoregressive (TV-AR) model is employed. Our main findings are: (i) the US stock market has evolved over time and the degree of market efficiency has cyclical fluctuations with a considerably long periodicity, from 30 to 40 years; and (ii) the US stock market has been efficient with the exception of four times in our sample period: during the long recession of 1873-1879; the recession of 1902-1904; the New Deal era; and the recession of 1957-1958 and soon after it. It is then shown that our results are partly consistent with the view of behavioural finance.

Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2015.1083532 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The Evolution of Stock Market Efficiency in the US: A Non-Bayesian Time-Varying Model Approach (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:48:y:2016:i:7:p:621-635

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2015.1083532

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().