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The Euro and European stock market efficiency

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  • Andrew Urquhart

Abstract

This article examines the impact of the introduction of the Euro currency on the market efficiency of 10 of the most developed European stock markets during the period 1988 to 2012. We use an autocorrelation test, a runs test, various formulations of the variance ratio test and the nonlinear BDS test, which are performed on daily data for the full sample period, as well as two subsets dictated by the introduction of the Euro currency. The full sample results are mixed, with the Netherlands accepting market efficiency and Ireland completely rejecting it, with the other markets providing mixed evidence for market efficiency. The subsample period results show that while some markets became more efficient after the introduction of the Euro currency (Spain and Finland) and some markets became more inefficient (France), some were unaffected by the introduction of the Euro (the Netherlands and Italy). Overall our results show that the impact of the Euro currency is mixed, indicating that its introduction was not a decisive factor in the behaviour of stock returns in European markets.

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  • Andrew Urquhart, 2014. "The Euro and European stock market efficiency," Applied Financial Economics, Taylor & Francis Journals, vol. 24(19), pages 1235-1248, October.
    • Handle: RePEc:taf:apfiec:v:24:y:2014:i:19:p:1235-1248
    DOI: 10.1080/09603107.2014.924292
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    1. Dao, Thong M. & McGroarty, Frank & Urquhart, Andrew, 2019. "The Brexit vote and currency markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 59(C), pages 153-164.
    2. Viorica CHIRILA & Ciprian CHIRILA, 2015. "The Steel European Stock Market Efficiency," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 7(4), pages 873-880, December.
    3. Dumitru-Nicusor Carausu, 2016. "European Integration And Capital Market Efficiency In Cee Countries," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 661-670, July.
    4. Andrew Urquhart, 2017. "How predictable are precious metal returns?," The European Journal of Finance, Taylor & Francis Journals, vol. 23(14), pages 1390-1413, November.
    5. Yang, Yan-Hong & Shao, Ying-Hui & Shao, Hao-Lin & Stanley, H. Eugene, 2019. "Revisiting the weak-form efficiency of the EUR/CHF exchange rate market: Evidence from episodes of different Swiss franc regimes," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 523(C), pages 734-746.
    6. Vasile Brătian & Ana-Maria Acu & Camelia Oprean-Stan & Emil Dinga & Gabriela-Mariana Ionescu, 2021. "Efficient or Fractal Market Hypothesis? A Stock Indexes Modelling Using Geometric Brownian Motion and Geometric Fractional Brownian Motion," Mathematics, MDPI, vol. 9(22), pages 1-20, November.

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