Stock Market Opening and Efficiency in Emerging Market Stock Prices: An Empirical Examination Using Endogenous Structural Break Techniques

38 Pages Posted: 26 Dec 1998

See all articles by Hiroyuki Kawakatsu

Hiroyuki Kawakatsu

affiliation not provided to SSRN

Matthew R. Morey

Pace University - Lubin School of Business - Department of Finance and Economics

Date Written: November 1998

Abstract

In this paper we investigate three empirical aspects of emerging stock markets. First, we use the endogenous structural break techniques of Bai (1996) and Bai and Perron (1998) to identify stock market opening dates in 16 different emerging market countries. The results indicate that there is some weak evidence that endogenous break opening dates precede the official opening dates as described by other authors. This suggests that information prior to the official opening date influenced market activity. Second, using the endogenous break dates as the true opening dates, we examine whether the opening of the market improves stock market efficiency. Using two different forms of data and several econometric tests, we find that opening has generally not increased stock market efficiency. Indeed, it appears that the markets were as efficient before the openings as they were after. Third, we apply the endogenous break techniques to emerging market composite portfolios. We find that the overall composite portfolio shows little evidence of a structural break. However, the regional indexes do indicate breaks around important periods of financial change. The Latin American composite index displays a break exactly during the period when the Brady Debt reduction initiative was announced. The Asian composite index shows several breaks including the period close to the 1997 East Asian Financial Crisis.

JEL Classification: F3, G2

Suggested Citation

Kawakatsu, Hiroyuki and Morey, Matthew R., Stock Market Opening and Efficiency in Emerging Market Stock Prices: An Empirical Examination Using Endogenous Structural Break Techniques (November 1998). Available at SSRN: https://ssrn.com/abstract=140056 or http://dx.doi.org/10.2139/ssrn.140056

Hiroyuki Kawakatsu

affiliation not provided to SSRN

Matthew R. Morey (Contact Author)

Pace University - Lubin School of Business - Department of Finance and Economics ( email )

One Pace Plaza
New York, NY 10038-1502
United States
212-618-6471 (Phone)

HOME PAGE: http://webpage.pace.edu/mmorey/