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Evidence of market inefficiency in a war environment

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  • David Chappell
  • Robert Eldridge

Abstract

This paper examines the UK FT30 stock index during the Second World War period 1939-1945 for weak form efficiency, showing that there is substantial structure in the data, albeit in two distinct subsets. Fitting a GARCH (p, q) model to each data subset yields R -2 values of around 19%; clear evidence that the data do not follow a random walk. The weak-form efficiency hypothesis is therefore rejected.

Suggested Citation

  • David Chappell & Robert Eldridge, 2000. "Evidence of market inefficiency in a war environment," Applied Financial Economics, Taylor & Francis Journals, vol. 10(5), pages 489-492.
    • Handle: RePEc:taf:apfiec:v:10:y:2000:i:5:p:489-492
    DOI: 10.1080/096031000416361
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    References listed on IDEAS

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    1. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    2. Bollerslev, Tim, 1987. "A Conditionally Heteroskedastic Time Series Model for Speculative Prices and Rates of Return," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 542-547, August.
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    Cited by:

    1. Gerald Schneider & Vera E. Troeger, 2006. "War and the World Economy," Journal of Conflict Resolution, Peace Science Society (International), vol. 50(5), pages 623-645, October.
    2. Theodore Panagiotidis, 2010. "Market efficiency and the Euro: the case of the Athens stock exchange," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 37(3), pages 237-251, July.
    3. Amelie Brune & Thorsten Hens & Marc Rieger & Mei Wang, 2015. "The war puzzle: contradictory effects of international conflicts on stock markets," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 62(1), pages 1-21, March.
    4. Hudson, Robert & Urquhart, Andrew, 2022. "Naval disasters, world war two and the British stock market," Research in International Business and Finance, Elsevier, vol. 59(C).
    5. Marie-Anne Cam & Vikash Ramiah, 2014. "The influence of systematic risk factors and econometric adjustments in catastrophic event studies," Review of Quantitative Finance and Accounting, Springer, vol. 42(2), pages 171-189, February.

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