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An empirical analysis on the efficiency of the microfinance investment market

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  • Inoue, Takeshi
  • Hamori, Shigeyuki

Abstract

This paper empirically analyzes the market efficiency of microfinance investment funds. For the empirical analysis, we use an index of the microfinance investment funds and apply two kinds of variance ratio tests to examine whether or not this index follows a random walk. We use the entire sample period from December 2003 to June 2010 as well as two sub-samples which divide the entire period before and after January 2007. The empirical evidence demonstrates that the index does not follow a random walk, suggesting that the market of the microfinance investment funds is not efficient. This result is not affected by changes in either empirical techniques or sample periods.

Suggested Citation

  • Inoue, Takeshi & Hamori, Shigeyuki, 2010. "An empirical analysis on the efficiency of the microfinance investment market," IDE Discussion Papers 271, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper271
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    References listed on IDEAS

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    1. Xavier Reille & Jasmina Glisovic-Mezieres & Yannis Berthouzoz & Damian Milverton, 2009. "MIV Performance and Prospects : Highlights from the CGAP 2009 MIV Benchmark Survey," World Bank Publications - Reports 9490, The World Bank Group.
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    4. Amélie Charles & Olivier Darné, 2009. "Variance‐Ratio Tests Of Random Walk: An Overview," Journal of Economic Surveys, Wiley Blackwell, vol. 23(3), pages 503-527, July.
    5. Andrew W. Lo, A. Craig MacKinlay, 1988. "Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test," The Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 41-66.
    6. Chow, K. Victor & Denning, Karen C., 1993. "A simple multiple variance ratio test," Journal of Econometrics, Elsevier, vol. 58(3), pages 385-401, August.
    7. Jasmina Glisovic & Xavier Reille, 2010. "Microfinance Investors Adjust Strategy in Tougher Market Conditions," World Bank Publications - Reports 9458, The World Bank Group.
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    9. Osamah M. Al‐Khazali & David K. Ding & Chong Soo Pyun, 2007. "A New Variance Ratio Test of Random Walk in Emerging Markets: A Revisit," The Financial Review, Eastern Finance Association, vol. 42(2), pages 303-317, May.
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    More about this item

    Keywords

    Efficient market hypothesis; Microfinance investment; Variance ratio test; Microfinance;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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