Modelling volatility and testing for efficiency in emerging capital markets: the case of the Athens stock exchange

Abstract

This study employs GARCH type models and tests for their validity over an Emerging Capital Market, the Athens Stock Exchange Market (ASE). Correct specification, of the different models, implies that the Weak Efficient Market Hypothesis does not hold for ASE. There is strong empirical evidence that ASE follows a pattern where last period's daily returns are correlated with today's returns and current volatility is positively related to past realizations. Negative shocks have an asymmetric impact on the daily stock returns series and political instabilities increase volatility over time. The mean of the series does not change during high volatile periods.