A multivariate test for stock market efficiency: the case of ASE

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Abstract
Market efficiency tests in developing markets display mixed evidence, in contrast to evidence on developed markets where the null hypothesis seems to be supported. Specifically, previous tests for market efficiency on the index and on samples of stocks traded in the Athens Stock Exchange (ASE) are broadly not supportive of the efficient market hypothesis. This paper introduces multivariate generalizations of the univariate Dickey-Fuller likelihood ratio tests to the class of Seemingly Unrelated Regressions, to investigate empirically the stock price efficiency of ASE. The method takes into account the contemporaneous correlation between stocks in the ASE, and avoids the sample biases which may result by considering only subsets of stocks listed in the exchange. Conclusively, the results confirm that the ASE is informationally inefficient, implying that past stock prices contain some information as to future price movements which investors may act on.

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