Assessing BRIC Countries’ Stock Market Efficiency with the Detrended Fluctuation Analysis

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MUKHACHEVA Galina DEEV Oleg

Rok publikování 2015
Druh Článek ve sborníku
Konference 7th International Conference Economic Challanges in Enlarged Europe
Fakulta / Pracoviště MU

Ekonomicko-správní fakulta

Citace
Obor Řízení, správa a administrativa
Klíčová slova stock market effectivity; detrended fluctuation analysis; emerging markets; BRIC
Popis Efficient market hypothesis is a core assumption of financial economics upon which the majority of asset pricing models is built. According to the EMH, the returns within time series present uncorrelated values and are not predictable on a historical basis. The detrended fluctuation analysis is implemented to check the possible correlations in stock returns. Our investigation examines the level of market efficiency of four emerging economies: Brazil, Russia, India and China, known as BRIC countries, for which contradicting evidence exists. Our results have certain implications for the credibility of the efficient market hypothesis and its alternative - adoptive market hypothesis by identifying time-varying market efficiency. The relative increase in efficiency is revealed for Russia, India and China. This paper contributes to the existing literature in two ways. First, it studies the market efficiency in BRIC countries by utilizing non-traditional methodology - detrended fluctuation analysis. Second, it includes sever recent turbulence in the stock market, such as the current subprime financial crisis or Chinese stock bubble.
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