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Exploring market efficiency levels: A powerful approach based on a gamma distribution

Author

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  • Askari, Abolfazl
  • Hajizadeh, Ehsan

Abstract

We introduce a novel measure to assess market inefficiency levels and examine their evolution over time using robust statistical principles. Our innovative approach not only facilitates a comprehensive exploration of market efficiency and its economic impacts but also allows for effortless comparisons across various assets, timeframes, regions, and data frequencies. Our findings reveal that during significant economic events, such as financial crises, markets tend to exhibit decreased efficiency. This research contributes to the understanding of market dynamics, offering a valuable and structured tool for analysts and policymakers.

Suggested Citation

  • Askari, Abolfazl & Hajizadeh, Ehsan, 2024. "Exploring market efficiency levels: A powerful approach based on a gamma distribution," Finance Research Letters, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:finlet:v:66:y:2024:i:c:s154461232400761x
    DOI: 10.1016/j.frl.2024.105731
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    More about this item

    Keywords

    Market efficiency; Financial markets; Inefficiency measurement;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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