Open AccessEfficiency of Asean-5 Markets: An Detrended Fluctuation Analysis
Author(s) -
Rui Dias,
Paula Heliodoro,
Paulo Alexandre
Publication year - 2020
Publication title -
mednarodno inovativno poslovanje
Language(s) - English
Resource type - Journals
ISSN - 1855-6175
DOI - 10.32015/jibm.2020.12.2.13-19
Subject(s) - detrended fluctuation analysis , stock (firearms) , economics , efficient market hypothesis , mean reversion , arbitrage , econometrics , financial market , financial economics , volatility (finance) , china , random walk , stock market , order (exchange) , statistics , finance , mathematics , geography , context (archaeology) , geometry , archaeology , scaling
This study intends to analyse efficiency, in its weak form, in the financial markets of Indonesia, Malaysia, Philippines, Singapore, Thailand (ASEAN-5), and China, during the global pandemic (Covid-19). Different approaches have been undertaken to carry out this analysis in order to determine whether: (i) ASEAN-5 financial markets and China are efficient, in their weak form, during the analysis period? The results indicate that the random walk hypothesis is rejected in all markets. The values of the variance ratios are, in all cases, lower than the unit, which implies that the returns are autocorrelated over time and, there is a reversion to the average, in all indices. In corroboration, the exponents Detrended Fluctuation Analysis (DFA), indicate significant long memories with a larger incidence in the Philippines and Singapore markets, however the Chinese market evidences anti persistence. These results demonstrate that stock prices do not completely reflect the available information and that stock prices movements are not i.i.d. This has implications for investors, as some returns can be expected, creating opportunities for arbitrage and abnormal returns, contrary to the assumptions of random walk and information efficiency. These conclusions also allow market regulators to implement measures to ensure better information in these regional markets.