Journal of Management Research

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Are Major Asian Markets Efficient?


Affiliations
1 Institute for Financial Management and Research 24, Kothari Road, Nungambakkam Chennai 600034, India
2 Centre for Advanced Financial Studies Institute for Financial Management and Research 24, Kothari Road, Nungambakkam Chennai 600034, India
     

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This paper evaluates the small sample properties of non-parametric joint rank and sign variance ratio tests to analyze the weak form efficiency in stock prices. It also assesses the size and power properties of the joint rank and sign variance ratio tests for small samples with the application of weighted bootstrap procedure. The results indicate that the weighted bootstrap tests exhibit desirable size properties and substantially higher power than the corresponding conventional rank-based tests. In addition, these tests are applied to examine the market efficiency of three major Asian emerging markets. The findings suggest that the efficiency characteristics of a given market do not remain the same and, in fact, vary over time depending on the major changes happening in the global financial markets. The results also indicate that India and China have become more efficient after the sub-prime crisis.

Keywords

Monte Carlo Experiment, Weighted Bootstrap, Non-parametric Variance Ratio Tests, Return Predictability
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  • Are Major Asian Markets Efficient?

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Authors

Dilip Kumar
Institute for Financial Management and Research 24, Kothari Road, Nungambakkam Chennai 600034, India
S. Maheswaran
Centre for Advanced Financial Studies Institute for Financial Management and Research 24, Kothari Road, Nungambakkam Chennai 600034, India

Abstract


This paper evaluates the small sample properties of non-parametric joint rank and sign variance ratio tests to analyze the weak form efficiency in stock prices. It also assesses the size and power properties of the joint rank and sign variance ratio tests for small samples with the application of weighted bootstrap procedure. The results indicate that the weighted bootstrap tests exhibit desirable size properties and substantially higher power than the corresponding conventional rank-based tests. In addition, these tests are applied to examine the market efficiency of three major Asian emerging markets. The findings suggest that the efficiency characteristics of a given market do not remain the same and, in fact, vary over time depending on the major changes happening in the global financial markets. The results also indicate that India and China have become more efficient after the sub-prime crisis.

Keywords


Monte Carlo Experiment, Weighted Bootstrap, Non-parametric Variance Ratio Tests, Return Predictability

References