Testing the Assertion that Emerging Asian Stock Markets are Becoming More Efficient

38 Pages Posted: 6 Jun 2006

See all articles by Kian-Ping Lim

Kian-Ping Lim

Universiti Malaya

Robert D. Brooks

Monash University; Financial Research Network (FIRN)

Melvin Hinich

University of Texas at Austin - Applied Research Laboratories; University of Texas at Austin - Department of Government

Date Written: March 30, 2006

Abstract

Testing the assertion that emerging stock markets are becoming more efficient over time has received increasing attention in the empirical literature in recent years. However, the statistical tests adopted in extant literature are designed to detect linear predictability, and hence disregard the possible existence of nonlinear predictability. Motivated by this concern, this study computes the bicorrelation statistics of Hinich (1996) in fixed-length moving sub-sample windows, and found that nonlinear predictability for all returns series follows an evolutionary time path. However, for most indices with the exception of Taiwan SE Weighted, there is no clear trend towards higher efficiency as predicted by the classical EMH.

Keywords: Predictability, Nonlinearity, Market Efficiency, Bicorrelations, Emerging stock markets

JEL Classification: G15, C49

Suggested Citation

Lim, Kian-Ping and Brooks, Robert Darren and Hinich, Melvin, Testing the Assertion that Emerging Asian Stock Markets are Becoming More Efficient (March 30, 2006). Available at SSRN: https://ssrn.com/abstract=906515 or http://dx.doi.org/10.2139/ssrn.906515

Kian-Ping Lim

Universiti Malaya ( email )

Department of Economics
Faculty of Economics and Administration
Kuala Lumpur, 50603
Malaysia

Robert Darren Brooks (Contact Author)

Monash University ( email )

Wellington Road
Clayton, Victoria 3168
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Melvin Hinich

University of Texas at Austin - Applied Research Laboratories ( email )

P.O. Box 8029
Austin, TX 78713-8029
United States
512-835-3278 (Phone)

HOME PAGE: http://www.gov.utexas.edu/hinich

University of Texas at Austin - Department of Government ( email )

College of Liberal Arts
1 University Station A1800
Austin, TX 78712
United States

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