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The Efficient Market Hypothesis Revisited: Evidence From The Five Small Open Asean Stock Markets

Author

Listed:
  • QAISER MUNIR

    (School of Business and Economics, Universiti Malaysia Sabah, Locked Bag 2073, 88999 Kota Kinabalu, Sabah, Malaysia)

  • KOK SOOK CHING

    (School of Business and Economics, Universiti Malaysia Sabah, Locked Bag 2073, 88999 Kota Kinabalu, Sabah, Malaysia)

  • FUMITAKA FUROUKA

    (School of Business and Economics, Universiti Malaysia Sabah, Locked Bag 2073, 88999 Kota Kinabalu, Sabah, Malaysia)

  • KASIM MANSUR

    (School of Business and Economics, Universiti Malaysia Sabah, Locked Bag 2073, 88999 Kota Kinabalu, Sabah, Malaysia)

Abstract

The efficient market hypothesis (EMH), which suggests that returns of a stock market are unpredictable from historical price changes, is satisfied when stock prices are characterized by a random walk (unit root) process. A finding of unit root implies that stock returns cannot be predicted. This paper investigates the stock prices behavior of five ASEAN (Association of Southeast Asian Nations) countries i.e., Indonesia, Malaysia, Philippines, Singapore and Thailand, for the period from 1990:1 to 2009:1 using a two-regime threshold autoregressive (TAR) approach which allows testing nonlinearity and non-stationarity simultaneously. Among the main findings, our results indicate that stock prices of Malaysia and Thailand are a non-linear series and are characterized by a unit root process, consistent with the EMH. Furthermore, we find that stock prices of Indonesia, Philippines and Singapore follow a non-linear series, however, stock price indices are stationary processes that are inconsistent with the EMH.

Suggested Citation

  • Qaiser Munir & Kok Sook Ching & Fumitaka Furouka & Kasim Mansur, 2012. "The Efficient Market Hypothesis Revisited: Evidence From The Five Small Open Asean Stock Markets," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 57(03), pages 1-12.
    • Handle: RePEc:wsi:serxxx:v:57:y:2012:i:03:n:s021759081250021x
    DOI: 10.1142/S021759081250021X
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    More about this item

    Keywords

    Efficient market hypothesis; threshold autoregressive model; unit root; C22; C52;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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