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Testing the efficiency of emerging markets: the case of the Baltic States

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  • Virmantas Kvedaras
  • Olivier Basdevant

Abstract

There is little evidence on the efficiency of the early stage of the capital market in transition countries, although market structure developments and the learning process could define the framework for efficient markets. The article tries to find out whether financial markets are efficient in the three Baltic States and if not, whether there are any signs of evolving to the efficient capital market. To answer these questions the analysis combines the methodology for testing the efficiency of capital market using the variance ratio robust to heteroscedasticity with the state-space representation, which enables us to use an efficient filtering technique - the Kalman filter - to get time varying autocorrelations. The official Estonian, Latvian, and Lithuanian stock exchange market indices TALSE, DJRSE, and LITIN comprising the most liquid parts of the stock market in a respective country are analysed. The main conclusion to be drawn from the analysis is that financial markets in the Baltic States are, with some turbulence, approaching weak form of efficiency.

Suggested Citation

  • Virmantas Kvedaras & Olivier Basdevant, 2002. "Testing the efficiency of emerging markets: the case of the Baltic States," Bank of Estonia Working Papers 2002-9, Bank of Estonia, revised 10 Oct 2002.
  • Handle: RePEc:eea:boewps:wp2002-09
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    Cited by:

    1. Bolek Monika & Gniadkowska-SzymaƄska Agata & Lyroudi Katerina, 2022. "Covid-19 Pandemic and Day-of-the-week Anomaly in Omx Markets," Central European Economic Journal, Sciendo, vol. 9(56), pages 158-177, January.
    2. Camelia Oprean, 2012. "Testing the financial market informational efficiency in emerging states," Review of Applied Socio-Economic Research, Pro Global Science Association, vol. 4(2), pages 181-190, Decembre.
    3. Graham Smith, 2012. "The changing and relative efficiency of European emerging stock markets," The European Journal of Finance, Taylor & Francis Journals, vol. 18(8), pages 689-708, September.

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