The Evolution of Stock Markets in Transition Economies

A significant autocorrelation of returns, also called predictability, may indicate market inefficiency. To test whether market efficiency has improved in transition economies, we develop a methodology based on a time-varying parameter model. We apply this methodology to a set of recently established...

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Bibliographic Details
Published inJournal of Comparative Economics Vol. 28; no. 3; pp. 456 - 472
Main Authors Rockinger, Michael, Urga, Giovanni
Format Journal Article
LanguageEnglish
Published San Diego Elsevier Inc 01.09.2000
Elsevier
Elsevier BV
SeriesJournal of Comparative Economics
Subjects
Economic models
Securities markets
Transition economies
Poland
Czech Republic
Hungary
Russia
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Summary:A significant autocorrelation of returns, also called predictability, may indicate market inefficiency. To test whether market efficiency has improved in transition economies, we develop a methodology based on a time-varying parameter model. We apply this methodology to a set of recently established stock markets over the period April 1994 through June 1999. We find that the Hungarian market always satisfies weak efficiency. For the Czech and Polish markets, we document convergence toward efficiency. On the other hand, a constantly significant level of predictability characterizes the Russian market. For this market, we cannot draw any conclusions concerning market efficiency.J. Comp. Econom., September 2000, 28(3), pp. 456–472. Department of Finance, HEC School of Management, 1, rue de la Libération, 78351 Jouy-en-Josas, France; and Department of Investment, Risk Management and Insurance, City University Business School, Frobisher Crescent, Barbican Centre, London EC2Y 8HB, United Kingdom.
ISSN:0147-5967
1095-7227
DOI:10.1006/jcec.2000.1669