Episodic Non-Linearities and Market Efficiency in the Mexican Stock Market

14 Pages Posted: 21 Apr 2011

See all articles by Claudio A. Bonilla

Claudio A. Bonilla

University of Chile - Faculties of Economics and Business

Rafael Romero

Adolfo Ibanez University; Universidad Austral de Chile

Elizabeth F. Gutierrez

Universidad de Chile

Date Written: June 2011

Abstract

We investigate the weak form of the efficient capital market hypothesis through the detection of a non-linear dynamic with potential for predictability of stock returns in the Mexican stock market. We apply the Hinich portmanteau bicorrelation test and the Brock, Dechert and Scheinkman test to the data. We observe that all the return series are characterized by a few brief periods of highly significant non-linearity. However, we cannot say that the Mexican market fails to satisfy the weak form of the efficient capital market hypothesis because the non-linear dependences appear on rare occasions and they are rapidly arbitraged away.

Suggested Citation

Bonilla, Claudio A. and Romero, Rafael and Romero, Rafael and Gutierrez, Elizabeth F., Episodic Non-Linearities and Market Efficiency in the Mexican Stock Market (June 2011). The Manchester School, Vol. 79, Issue 3, pp. 367-380, 2011, Available at SSRN: https://ssrn.com/abstract=1817145 or http://dx.doi.org/10.1111/j.1467-9957.2009.02159.x

Claudio A. Bonilla (Contact Author)

University of Chile - Faculties of Economics and Business ( email )

Santiago
Chile

Rafael Romero

Adolfo Ibanez University

Diagonal Las Torres 2640 Peñaleón
Presidente Errázuriz 3485 Las Condes
Santiago, 794-1169
Chile

Universidad Austral de Chile

Temuco Chile
Santiago de Chile
Temuco / Santiago / Talca, Talca
Chile

Elizabeth F. Gutierrez

Universidad de Chile ( email )

Pío Nono Nº1, Providencia
Santiago, R. Metropolitana 7520421
Chile

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