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Testing the weak-form efficiency of stock markets: A comparative study of emerging and industrialised economies

Jacinta Chikaodi Nwachukwu (Business School, University of Huddersfield, Huddersfield, UK)
Omowunmi Shitta (African Governance and Development Institute, Yaoundé, Cameroon)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 20 July 2015



The purpose of this paper is to focus on the weak-form efficiency of 24 emerging and nine industrial stock market indices around the world. It tests for the predictability and the presence of seasonal patterns in rates of return from January 2000 to December 2010.


It reports on the descriptive statistics for estimated monthly percentage returns. This is complemented by the use of both parametric and non-parametric techniques to test for abnormal return behaviour in stock markets.


The results show that: first, emerging economies which persisted with market-oriented reforms had higher returns relative to risk, indicating their attractiveness for risk diversification; second, successive changes in stock prices were interrelated with each other and therefore contained information for predicting future prices in two-thirds of the emerging markets compared to one-third of industrial economies; and third, the turn-of-the calendar year effect was present for half of the emerging markets vis-à-vis one-quarter of the developed countries. The authors found limited support for the tax-loss selling hypothesis for both the emerging and industrial economies.

Research limitations/implications

The paper fails to specifically analyse the implications for security returns of changes in technology, institutions, volume of trading and regulations in the different stock markets.

Practical implications

The results should be particularly informative for foreign investors with regard to the risk diversification benefits of the various emerging and industrialised stock markets and the expected risk-return trade-offs.


The paper provides a more powerful explanation for the role of institutional arrangements, infrastructure, culture and other country-specific risk factors in asset pricing compared to disparate case studies.



JEL Classification — G11, G14, G15


Nwachukwu, J.C. and Shitta, O. (2015), "Testing the weak-form efficiency of stock markets: A comparative study of emerging and industrialised economies", International Journal of Emerging Markets, Vol. 10 No. 3, pp. 409-426.



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