Measuring capital market efficiency: Global and local correlations structure

0381818 - ÚTIA 2013 RIV NL eng J - Journal Article
Krištoufek, Ladislav - Vošvrda, Miloslav
Measuring capital market efficiency: Global and local correlations structure.
Physica. A : Statistical Mechanics and its Applications. Roč. 392, č. 1 (2013), s. 184-193. ISSN 0378-4371. E-ISSN 1873-2119
R&D Projects: GA ČR(CZ) GBP402/12/G097
Institutional support: RVO:67985556
Keywords : Capital market efficiency * Fractal dimension * Long-range dependence * Short-range dependence
Subject RIV: AH - Economics
Impact factor: 1.722, year: 2013
http://library.utia.cas.cz/separaty/2012/E/kristoufek-measuring capital market efficiency global and local correlations structure.pdf

We introduce a new measure for capital market efficiency. The measure takes into consid- eration the correlation structure of the returns (long-term and short-term memory) and local herding behavior (fractal dimension). The efficiency measure is taken as a distance from an ideal efficient market situation. The proposed methodology is applied to a portfolio of 41 stock indices. We find that the Japanese NIKKEI is the most efficient market. From a geographical point of view, the more efficient markets are dominated by the European stock indices and the less efficient markets cover mainly Latin America, Asia and Oceania. The inefficiency is mainly driven by a local herding, i.e. a low fractal dimension.
Permanent Link: http://hdl.handle.net/11104/0212200