Malaysian finance sector weak-form efficiency: Heterogeneity, structural breaks, and cross-sectional dependence

Qaiser Munir, and Kok, Sook Ching (2015) Malaysian finance sector weak-form efficiency: Heterogeneity, structural breaks, and cross-sectional dependence. Journal of Economics, Finance and Administrative Science , 20 (39). pp. 105-117. ISSN 2077-1886

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Official URL: http://dx.doi.org/10.1016/j.jefas.2015.10.002

Abstract

This study examines the weak-form efficient market hypothesis (EMH) for the Finance Sector in Malaysian Stock Exchange, by exploring and scrutinizing the firm-level efficiency over for the period from 1st January 1997 to 31st December 2014. For this purpose, we apply panel nonlinear unit root test that accounts for heterogeneity, and panel stationarity test to allow for the presence of structural breaks and cross-sectional dependence (CSD). The main findings of this study suggest the following: first, there is a strong CSD among the price series of finance stocks; second, unlike the traditional panel unit root tests that provide mixed-results, the panel stationarity test which incorporates structural breaks and CSD suggests that these series are characterized as random walk processes implying the Finance Sector is weak-form efficient. The finding of weak-form efficiency has salient implications in terms of capital allocation, stock price predictability, forecasting technique, and the impact of shocks to stock prices.

Item Type:Article
Uncontrolled Keywords:Market efficiency, Financial firms, Banks, Heterogeneity, Panel data, Structural breaks, Cross-sectional dependence
Subjects:H Social Sciences > HG Finance
Divisions:FACULTY > Faculty of Business, Economics and Accounting
ID Code:14600
Deposited By:IR Admin
Deposited On:18 Oct 2016 12:33
Last Modified:18 Oct 2016 12:33

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