Ranking World Equity Markets on the Basis of Market Efficiency and Integrity

Abstract

This study ranks twenty-five world equity markets from the North American, European, Middle-eastern and Asia-Pacific regions on the twin objectives of market efficiency and integrity. Though rhetoric from the chosen markets suggest that these are equally important goals we find evidence that their importance varies significantly across markets. The key findings of the study are that the Deustche Boerse and the New York Stock Exchange stand out among their international peers as markets of high efficiency and integrity. Notwithstanding the performance of these markets, European markets hold eight of the top ten places while the top three Asia-Pacific markets are New Zealand, Tokyo and Hong Kong exchanges ranked 11th, 12th and 14th respectively. While the Deutsche Boerse - floor trading in Frankfurt, holds the mantel as the market with the highest integrity, its ranking on efficiency is much lower at 14th. This is symptomatic of a more pervasive result, namely, that efficient markets are not necessarily markets with higher integrity and vice versa. Euronext Paris which is ranked 2nd on efficiency is only ranked 19th on integrity is evidence of the latter. Given the disparity between the two goals, scope appears to exist for international alliances among securities markets with the objective of enhancing one or the other goal.

Keywords: Market Efficiency, Market Integrity, Manipulation

JEL Classification: G10, G14