Are Emerging Markets More Profitable? Implications for Comparing Weak and Semi-Strong Form Efficiency

71 Pages Posted: 24 Jan 2007 Last revised: 5 Mar 2015

See all articles by John M. Griffin

John M. Griffin

University of Texas at Austin - Department of Finance

Patrick J. Kelly

University of Melbourne - Department of Finance

Federico Nardari

University of Melbourne - Department of Finance

Date Written: June 23, 2009

Abstract

Using data from 56 markets, we find that short-term reversal, post-earnings drift, and momentum strategies earn similar profits in emerging and developed markets. Portfolio-level variance ratios and market delay measures show greater deviations from efficiency in developed markets and firm-level variance ratios are similar across emerging and developed markets. Conceptually, we show that efficiency tests can yield misleading inferences because they do not control for the information environment. Our evidence corrects misperceptions that emerging markets feature larger trading profits and higher return autocorrelation, highlights crucial limitations of weak and semi-strong form efficiency measures, and points to the importance of measuring informational aspects of efficiency.

Keywords: market efficiency, information efficiency, synchronicity, international finance, earnings announcements, emerging markets

JEL Classification: F30, G14, G15

Suggested Citation

Griffin, John M. and Kelly, Patrick J. and Nardari, Federico, Are Emerging Markets More Profitable? Implications for Comparing Weak and Semi-Strong Form Efficiency (June 23, 2009). EFA 2007 Ljubljana Meetings Paper; AFA 2008 New Orleans Meetings Paper. Available at SSRN: https://ssrn.com/abstract=959006 or http://dx.doi.org/10.2139/ssrn.959006

John M. Griffin (Contact Author)

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-471-6621 (Phone)

HOME PAGE: http://www.jgriffin.info

Patrick J. Kelly

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

Federico Nardari

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

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