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Weak-form market efficiency and calendar anomalies for Eastern Europe equity markets

By Francesco Guidi, Rakesh Gupta and Suneel Maheshwari

Abstract

In this paper we test the weak form of the efficient market hypothesis for Central and Eastern Europe (CEE) equity markets for the period 1999-2009. To test weak form efficiency in the markets this study uses, autocorrelation analysis, runs test, and variance ratio test. We find that stock markets of the Central and Eastern Europe do not follow a random walk process. This is an important finding for the CEE markets as an informed investor can identify mispriced assets in the markets by studying the past prices in these markets. We also test the presence of daily anomalies for the same group of stock markets using a basic model and a more advanced Generalized Autoregressive Conditional Heteroskedasticity in Mean (GARCH-M) model. Results indicate that day-of-the-week effect is not evident in most markets except for some. Overall results indicate that some of these markets are not weak form efficient and an informed investor can make abnormal profits by studying the past prices of the assets in these markets.

Topics: G14 - Information and Market Efficiency; Event Studies, G12 - Asset Pricing; Trading volume; Bond Interest Rates
Year: 2010
DOI identifier: 10.1177/097265271101000304
OAI identifier: oai:mpra.ub.uni-muenchen.de:21984

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