Efficient market hypothesis in emerging markets: Panel data evidence with multiple breaks and cross sectional dependence

• Main Authors: Ahmad, Abd Halim, Mohd Daud, Siti Nurazira, W.N.W., Azman-Saini
• Format: Article
• Language: English
• Published: AccessEcon 2010
• Subjects: HB Economic Theory; HC Economic History and Conditions
• Online Access: http://repo.uum.edu.my/3901/1/aH.pdf; http://repo.uum.edu.my/3901/; http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I4-P274.pdf

The purpose of this paper is to re-examine whether mean reversion property hold for 15 emerging stock markets for the period 1985 to 2006. Utilizing a panel stationarity test that is able to account for multiple structural breaks and cross sectional dependence, we find that the emerging stock markets follow a random walk process. However, further analysis on individual series show that the majority of stock prices in emerging markets are governed by a mean reverting process. This result, which is inconsistent with efficient market hypothesis, suggests that past information is useful in predicting future prices in most of the markets.