Random walks and market efficiency in European equity markets

Worthington, Andrew C. & Higgs, Helen (2004) Random walks and market efficiency in European equity markets. Global Journal of Finance and Economics, 1(1), pp. 59-78.


This paper tests for random walks and weak-form market efficiency in European equity markets. Daily returns for sixteen developed markets (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom) and four emerging markets (Czech Republic, Hungary, Poland and Russia) are examined for random walks using a combination of serial correlation coefficient and runs tests, Augmented Dickey-Fuller (ADF), Phillips-Perron (PP) and Kwiatkowski, Phillips, Schmidt and Shin (KPSS) unit root tests and multiple variance ratio (MVR) tests. The results, which are in broad agreement across the approaches employed, indicate that of the emerging markets only Hungary is characterized by a random walk and hence is weak-form efficient, while in the developed markets only Germany, Ireland, Portugal, Sweden and the United Kingdom comply with the most stringent random walk criteria.

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ID Code: 2319
Item Type: Journal Article
Refereed: Yes
Keywords: Developed and emerging markets, random walk hypothesis, market efficiency
ISSN: 0972-9496
Subjects: Australian and New Zealand Standard Research Classification > ECONOMICS (140000)
Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BANKING FINANCE AND INVESTMENT (150200) > Financial Econometrics (150202)
Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > ECONOMETRICS (140300) > Time-Series Analysis (140305)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 2004
Deposited On: 31 Oct 2005 00:00
Last Modified: 05 Jan 2011 13:25

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