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Can a Stock Index be Less Efficient than Underlying Shares? An Analysis Using Malta Stock Exchange Data

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  • Silvio John Camilleri

    (Banking & Finance Dept., FEMA - University of Malta)

Abstract

Researchers often assume that stock market indices are the best possible yardstick in terms of market efficiency. The paper investigates this concept using data from the Malta Stock Exchange (MSE). The fact that a significant number of MSE shares do not trade everyday, may imply that the most liquid shares on this exchange are more efficient than the market index, whose value is dependent on shares of varying liquidity levels - including the less liquid ones. The paper applies various tests to compare the pricing efficiency of the MSE Index to that of the most liquid share quoted on the exchange. It is found that the MSE Index is still more efficient than the latter share.

Suggested Citation

  • Silvio John Camilleri, 2005. "Can a Stock Index be Less Efficient than Underlying Shares? An Analysis Using Malta Stock Exchange Data," Finance 0507006, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0507006
    Note: Type of Document - pdf; pages: 21
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    References listed on IDEAS

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    More about this item

    Keywords

    Malta Stock Exchange; Non-Synchronous Trading; Stock Markets.;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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