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Evolving Stock Market Efficiency

  • Mohamed El Hedi Arouri
  • Fredj Jawadi
  • Duc Khuong Nguyen
Chapter
Part of the Contributions to Management Science book series (MANAGEMENT SC.)

Abstract

Understanding the efficiency of emerging stock markets have become important over the last decades as they are now reasonably integrated with developed and world markets. If emerging markets are efficient, both foreign and domestic investors could, when making their investment decisions, consider an asset price to reflect its true fundamental value at all times.

The empirical studies on emerging market efficiency are however very challenging. First, the heterogeneity of these markets in terms of market size and development levels often leads to country-specific results. Second, only a few studies focus on tests of efficient market hypothesis in emerging markets because the majority of them appear to be less efficient than the semi-strong and the strong forms due to numerous market imperfections such as transaction costs, poor quality of information disclosures, thin trading, and inadequate financial and accounting regulations. Finally, their degree of efficiency may evolve though time, which typically reflects different stages of development and gradual process of liberalization.

The purpose of this chapter is to provide a comprehensive review of the efficient market theory and to explore how the market processes information in emerging countries. Specifically, we present a dynamic parameter model that is suitable for characterizing the possibly time-varying pattern of weak form efficiency in emerging stock markets under the gradual effects of market reforms.

Keywords

Stock Market Transaction Cost Stock Return Stock Prex Market Efficiency 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2010

Authors and Affiliations

  • Mohamed El Hedi Arouri
    • 1
  • Fredj Jawadi
    • 2
  • Duc Khuong Nguyen
    • 3
  1. 1.Faculty of Law, Economics, and ManagementUniversity of OrleansOrléansFrance
  2. 2.Amiens School of ManagementAmiensFrance
  3. 3.ISC Paris School of ManagementParisFrance

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