Testing Stock Market Efficiency in Emerging Financial Markets: A Comparative Test of Random Walk Behaviour (RWB) in High and Low Volatility Regimes’ (original) (raw)

Abstract One of the most contentious issues in finance is possibly whether the financial markets are efficient or not. When determining the market efficiency, Efficient Market Hypothesis (EMH) has attracted the interest of greater number of academics and practitioners in empirical finance literature. However, empirical studies of the market efficiency in the two regimes of high and low volatility are still unexplored. Thus, this study attempts to identify the random work behaviour in high and low volatility regimes in emerging financial markets namely, India, China, Indonesia, Korea, Malaysia, Taiwan and Philippine. Returns of daily, weekly and monthly of the market portfolios from 2000 to 2010 are used for the investigation. Primarily, the Iterated Cumulative Sums of Squares (ICSS) algorithm and GARCH regression are used to identify the volatility breaks and for the purpose of subdividing the original series in to low volatile and high volatile regimes. Subsequently, popular econom...