Robust Weak-Form Efficiency Tests in Volatile European Equity Indices

11 Pages Posted: 3 Nov 2012 Last revised: 23 Sep 2013

See all articles by Kwesi Enninful

Kwesi Enninful

Dublin City University

Michael M. Dowling

ESC Rennes School of Business

Date Written: November 2, 2012

Abstract

Robust weak form efficiency tests are conducted to examine market efficiency in two pan-European indices; the large capitalisation EuroStoxx 50 and the small capitalisation EuroStoxx Small from January 2000 to March 2012. Applying the non-parametric Belaire-Franch and Opong (2005) multiple variance ratio test and Kim’s (2006) wild bootstrap technique shows that large capitalisation stocks display evidence of negative serial correlation in the recent time period, and these indices to generally have greater weak-form efficiency over longer time windows. This finding contrasts with Hung et al (2009), particularly in large capitalisation equities, and suggests that weak-form efficiency can be influenced by high market volatility.

Keywords: Variance Ratio, Kim wild bootstrap, weak-form efficiency, European equity

JEL Classification: G12, G14

Suggested Citation

Enninful, Kwesi and Dowling, Michael M., Robust Weak-Form Efficiency Tests in Volatile European Equity Indices (November 2, 2012). Applied Economics Letters, Vol. 20, No. 9, 2013. Available at SSRN: https://ssrn.com/abstract=2170520 or http://dx.doi.org/10.2139/ssrn.2170520

Kwesi Enninful

Dublin City University ( email )

Ireland 9
Dublin 9, leinster 9
Ireland

Michael M. Dowling (Contact Author)

ESC Rennes School of Business ( email )

Rue Robert d'arbrissel, 2
Rennes, 35000
France

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