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Journal of Economic Interaction and Coordination

Erschienen in:

11.08.2018 | Regular Article

Frontier markets’ efficiency: mutual information and detrended fluctuation analyses

verfasst von: Wahbeeah Mohti, Andreia Dionísio, Paulo Ferreira, Isabel Vieira

Erschienen in: Journal of Economic Interaction and Coordination | Ausgabe 3/2019

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Abstract

This study tests weak form efficiency in frontier markets. Mutual information and detrended fluctuation analyses are performed to assess global correlation and long range dependence in the stock markets of twenty three countries. The results indicate that Slovenia is the only case where there is evidence compatible with weak form efficiency. The relatively less inefficient markets are mainly located in Europe and America, and the relatively more inefficient mainly in the Middle East. This information is useful for investors, but also for the assessed countries’ regulators as they indicate that relevant impediments are preventing the exploitation of potential profitable opportunities.

Vorheriger Artikel Exchange rate dynamics under limits of arbitrage and heterogeneous expectations

Nächster Artikel Growth, unemployment and heterogeneity

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The list of frontier markets considered in our empirical analysis is supplied below, in Sect. 2.

Transparency International Corruption Perception Index 2015: http://www.transparency.org/cpi2015.

Bulgaria is an MSCI standalone market index.

MSCI announced in June 2016 the intention (already materialized) to reclassify Pakistan as an Emerging market as of May 2017.

According to Granger et al. (2004, p. 651), a good dependence measure must have the following properties:

(i)

Be defined for both continuous and discrete random variables;

(ii)

Be normalized to zero and lie between 0 and + 1, when the variables are independent;

(iii)

If there is a measurable exact (nonlinear) relationship between the random variables, the modulus of the measure is equal to unity;

(iv)

In case of a bivariate normal distribution, it must be the same as, or have a simple relationship with, the linear correlation coefficient;

(v)

Be a true measure of distance and not just of divergence;

(vi)

Be invariant under continuous and strictly increasing transformations.

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Titel: Frontier markets’ efficiency: mutual information and detrended fluctuation analyses
verfasst von: Wahbeeah Mohti
Andreia Dionísio
Paulo Ferreira
Isabel Vieira
Publikationsdatum: 11.08.2018
Verlag: Springer Berlin Heidelberg
Erschienen in: Journal of Economic Interaction and Coordination / Ausgabe 3/2019
Print ISSN: 1860-711X
Elektronische ISSN: 1860-7128
DOI: https://doi.org/10.1007/s11403-018-0224-9

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