Stock Exchange Mergers and Weak Form of Market Efficiency: The Case of Euronext Lisbon

Posted: 3 Nov 2013

See all articles by João Paulo Vieito

João Paulo Vieito

Scholl of Business Studies - Polytechnic Instituto of Viana do Castelo

Walayet A. Khan

University of Evansville

Date Written: November 1, 2009

Abstract

This exploratory paper is among the first to examine the impact of stock exchange mergers on informational market efficiency. We focus on the merger of Bolsa de Valores de Lisboa e Porto Portuguese Stock Exchange) with Euronext in 2002 (that created Euronext Lisbon). To investigate this question we perform numerous statistical tests: serial correlation test (ACF test), runs test, unit root test (Kwiatkowski, Philips, Schmidt and Shin, 1992), multiple variance ratio test (Chow and Denning,1993) and ranks and signs test (Wright, 2000). The results indicate that the Portuguese Equity Market is inefficient in weak form during pre-merger period implying that investors possessed an opportunity to earn abnormal returns though small in magnitude. The results, sensitive to the methodology used, indicate a mixed evidence of improvement in market efficiency during the post-merger period. Although the findings are mixed, yet most tests show a tendency of improved efficiency.

Keywords: Stock exchange mergers; Random walk hypothesis; Market efficiency

JEL Classification: C12, C14, G14, G15

Suggested Citation

Vieito, João Paulo and Khan, Walayet A., Stock Exchange Mergers and Weak Form of Market Efficiency: The Case of Euronext Lisbon (November 1, 2009). International Review of Economics & Finance, Vol. 12, 2009, Available at SSRN: https://ssrn.com/abstract=2348813

João Paulo Vieito

Scholl of Business Studies - Polytechnic Instituto of Viana do Castelo ( email )

Avenida Miguel Dantas
Valença, 4930
Portugal

Walayet A. Khan (Contact Author)

University of Evansville ( email )

School of Business Admin 1800 Lincoln Avenue
Evansville, IN 47722
United States
812-479-2869 (Phone)
812-479-2872 (Fax)

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