Measuring the speed of convergence of stock prices: A nonparametric and nonlinear approach

Ryu, Deockhyun

doi:10.1016/j.econmod.2015.07.009

Cited by 10 publications

(4 citation statements)

References 52 publications

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“…The unit root property of the data generation process is critical, as Kim and Ryu (2015) pointed out, in order to clarify the true essence of the capital market efficiency. If the unit root property of the data is not examined before we conduct empirical verification of the stock market, the findings may be deceptive.…”

Section: Literature Reviewmentioning

confidence: 99%

Is the Stock Market Efficient? Evidence from Nonlinear Unit Root Tests for Nigeria

Lawal

Oseni

Asaleye³

et al. 2021

Asian Economic and Financial Review

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This study re-examined the traditional research topic in finance-the efficient market hypothesis (EMH) within the context of a nonlinearity unit root test using daily data sourced on the Nigerian economy. This was premised on two key motivations. First, the study observed that most of the existing studies on EMH are based on an aggregate stock index and the presence of heterogeneity of listed firms on the floor of the exchange can make the results obtained from aggregate stock price-based tests misleading due to spuriousness. To overcome this, the study tested the validity of EMH at a sectorial level. The second motivation centers on the observed nonlinear property of the time series data used in the existing literature. The study first examines the unit root properties of the data by applying the Harvey, Leybourne, and Xiao ( 2008) methods. The results indicate rejections of the null hypothesis for all the series, an indication that stock market indices in Nigeria are nonlinear and asymmetric in nature. This suggests that results obtained from linear based models could be biased. In order to achieve more accurate results, the study applied the ESPAR model and observed that, overall, there is an abundance of evidence to show that the Nigerian stock exchange is mean reverting, thus investors are advised to adopt a contrarian investment strategy to maximize the opportunities in the market. Contribution/Originality:This study explored the validity of efficient market hypothesis in Nigeria within the context of nonlinear unit root estimates and observed that the market is mean reverting.

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Section: Literature Reviewmentioning

confidence: 99%

Is the Stock Market Efficient? Evidence from Nonlinear Unit Root Tests for Nigeria

Lawal

Oseni

Asaleye³

et al. 2021

Asian Economic and Financial Review

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“…Hegwood and Nath (2013) examined the same hypothesis across US cities by including structural breaks and find overwhelming evidence of convergence of relative prices across cities. Kim and Ryu (2015) highlight the stock price convergence using the nonlinear, nonparametric stochastic model in G7 countries.…”

Section: Review Of Literaturementioning

confidence: 99%

Price dispersion across Indian states: A club convergence analysis

Jangam

Akram

Sahoo

2020

Journal of Public Affairs

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This study examines the price convergence across 28 Indian states and 7 union territories at an aggregate and subgroups level over the period 2011–12 to 2017–18. We employ a novel approach of Phillips and Sul panel convergence technique, which accounts for transitional dynamics and heterogeneity in the panel. The results suggest price divergence and evidence of clubs across Indian states at both aggregate and subgroup level. The outcomes of this study help policymakers in addressing the price dispersion across states, which in turn improves the market integration, allocation of resources, and standard of living.

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“…All these are country specific studies. Kim and Ryu (2015) used a larger data set for examining MSCI stock price indices of the G7 countries but they did not examine the data from emerging countries. We study a relatively large data set covering 23 different emerging economies 6 and also 10 indices from developed countries to make a comparison.…”

Section: Review Of Literaturementioning

confidence: 99%

Speed of Price Adjustment towards Market Efficiency: Evidence from Emerging Countries

Kayal

Maheswaran

2018

Journal of Emerging Market Finance

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The speed with which stock markets adjust to information and news flow into asset prices is of importance to investors, regulators and policymakers. In this article, we provide a simple and uniform empirical framework involving the use of a volatility measure to compare the speeds of adjustment in index prices in response to all available market information. The stock indices of 23 major emerging economies are compared with 10 mature stock indices from developed countries with reference to the speed of their price adjustments. We find that the index prices of developed countries adjust faster when compared to those of emerging countries. Our findings are independent of any GARCH specification and are also robust to potential mistakes in the model specification because we make use of a fully empirical bootstrap procedure to compute the standard errors. We also rank the countries in terms of the speed of index price adjustment. The results show that the random walk effect is generic and exists in all price indices.

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Measuring the speed of convergence of stock prices: A nonparametric and nonlinear approach

Cited by 10 publications

References 52 publications

Is the Stock Market Efficient? Evidence from Nonlinear Unit Root Tests for Nigeria

Is the Stock Market Efficient? Evidence from Nonlinear Unit Root Tests for Nigeria

Price dispersion across Indian states: A club convergence analysis

Speed of Price Adjustment towards Market Efficiency: Evidence from Emerging Countries

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