International stock market efficiency and integration: Evidences from Asian and US markets

Abstract

Purpose

The purpose of this paper is to examine the informational efficiency and integration simultaneously for select Asian and US stock markets while considering the impact of recent financial crisis.

Design/methodology/approach

Daily stock market data from 13 world markets covering the period of ten years (from January 1, 2000 to December 31, 2010) is tested using Run test, Unit root test, GARCH(1, 1) model, Pearson correlation coefficient, Johansen’s cointegration test and Granger causality test.

Findings

It is concluded that the markets under study are inefficient in weak form which creates the chances of earning abnormal returns for the investors. Furthermore, the markets are found to be correlated and integrated in long-run, which makes the international fund diversification insignificant. The degree of inefficiency, in general, is not affected by the recent financial crisis but the level of integration among stock markets is reduced with the effect of recent financial crisis.

Practical implications

Individual/institutional investors, portfolio managers, corporate executives, policy makers and practitioners may draw meaningful conclusions from the findings of this type of researches while operating in stock markets. They can use such studies for the management of their existing portfolios as their portfolio management strategies may be, up to some extent, dependent upon such research work.

Originality/value

The originality of the present study lies in the fact that this paper is an attempt to fill the time gap of comprehensive researches on Asian and US markets and an effort to test stock market efficiency and integration simultaneously.

Citation

Seth, N. and Sharma, A.K. (2015), "International stock market efficiency and integration: Evidences from Asian and US markets", Journal of Advances in Management Research, Vol. 12 No. 2, pp. 88-106. https://doi.org/10.1108/JAMR-07-2011-0010