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EPISODIC NON‐LINEARITIES AND MARKET EFFICIENCY IN THE MEXICAN STOCK MARKET
Author(s) -
BONILLA CLAUDIO A.,
ROMERO RAFAEL,
GUTIERREZ ELIZABETH
Publication year - 2011
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2009.02159.x
Subject(s) - predictability , economics , stock market , efficient market hypothesis , capital market , econometrics , market efficiency , financial economics , stock (firearms) , monetary economics , mathematics , finance , geography , statistics , context (archaeology) , archaeology
We investigate the weak form of the efficient capital market hypothesis through the detection of a non‐linear dynamic with potential for predictability of stock returns in the Mexican stock market. We apply the Hinich portmanteau bicorrelation test and the Brock, Dechert and Scheinkman test to the data. We observe that all the return series are characterized by a few brief periods of highly significant non‐linearity. However, we cannot say that the Mexican market fails to satisfy the weak form of the efficient capital market hypothesis because the non‐linear dependences appear on rare occasions and they are rapidly arbitraged away.