Weak Form Efficiency: A Comparison between the Spanish and the U.S. Capital Stock Markets

Abstract

This paper identifies some weak-form inefficiencies present in the U.S. and/or the Spanish stock market: autocorrelation, cross correlation and day of the week and month effects. The main findings are that several inefficiencies exist in both markets, the strongest one being the lead-lag effect that exists between large firms and small firms. In the U.S., the effect is strongest with weekly data, although with real transaction costs no significant abnormal return can be obtained from investment strategies that take advantage of this effect. In Spain, though, even with real transaction costs, strongly significant abnormal returns can be obtained.

JEL Classification: G14