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The Efficiency of Emerging Stock Markets: Empirical Evidence from the South Asian Region

Cooray, Arusha and Wickremasinghe, Guneratne (2005): The Efficiency of Emerging Stock Markets: Empirical Evidence from the South Asian Region. Published in: Journal of Developing Areas , Vol. 1, No. 41 (2007): pp. 171-184.

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Abstract

This paper examines weak form efficiency in the stock markets of India, Sri Lanka, Pakistan and Bangladesh; and the linkages between these four markets. The Augmented Dicky Fuller (ADF-1979), the Phillip-Perron (PP-1988), the Dicky-Fuller Generalized Least Square (DF-GLS 1996) and Elliot-Rothenber-Stock (ERS – 1996) tests are used to examine stock market efficiency. Weak form efficiency is supported by the classical unit root tests, however, it is not strongly supported for Bangladesh under the DF-GLS and ERS tests. The cointegration and Granger causality tests indicate a high degree of interdependence between the South Asian stock markets.

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