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Efficiency market hypothesis in an emerging market: does it really hold for Malaysia?

This study revisits the efficient market hypothesis (EMH) with regard to the Kuala Lumpur Stock Exchange (KZSE) at the sectoral level. Based on Liu and Narayan’s (2011) GARCH-based unit-root with structural breaks test, the unit-root null is rejected for all except one sector. By contrast, models ba...

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Main Authors: Soon, Siew-Voon, Baharumshah, Ahmad Zubaidi, Chan, Tze-Haw
Format: Article
Published: Penerbit Universiti Kebangsaan Malaysia 2014
Online Access:http://psasir.upm.edu.my/id/eprint/37409/
https://www.ukm.my/jurnalpengurusan/article/efficiency-market-hypothesis-in-an-emerging-market-does-it-really-hold-for-malaysia/
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spelling my.upm.eprints.374092023-09-27T08:06:23Z http://psasir.upm.edu.my/id/eprint/37409/ Efficiency market hypothesis in an emerging market: does it really hold for Malaysia? Soon, Siew-Voon Baharumshah, Ahmad Zubaidi Chan, Tze-Haw This study revisits the efficient market hypothesis (EMH) with regard to the Kuala Lumpur Stock Exchange (KZSE) at the sectoral level. Based on Liu and Narayan’s (2011) GARCH-based unit-root with structural breaks test, the unit-root null is rejected for all except one sector. By contrast, models based on commonly used unit-root tests that ignore heteroskedastic and/or breaks tend to favour the EMH. We find that the half-life estimates based on the local-persistent model are short, with the majority of them taking less than six months to absorb half a shock. All in all, the indices examined are largely inconsistent with weak-form efficiency, which implies that the returns on equity portfolios are indeed predictable. Penerbit Universiti Kebangsaan Malaysia 2014 Article PeerReviewed Soon, Siew-Voon and Baharumshah, Ahmad Zubaidi and Chan, Tze-Haw (2014) Efficiency market hypothesis in an emerging market: does it really hold for Malaysia? Jurnal Pengurusan, 42. pp. 31-42. ISSN 0127-2713; ESSN: 2716-5906 https://www.ukm.my/jurnalpengurusan/article/efficiency-market-hypothesis-in-an-emerging-market-does-it-really-hold-for-malaysia/
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
description This study revisits the efficient market hypothesis (EMH) with regard to the Kuala Lumpur Stock Exchange (KZSE) at the sectoral level. Based on Liu and Narayan’s (2011) GARCH-based unit-root with structural breaks test, the unit-root null is rejected for all except one sector. By contrast, models based on commonly used unit-root tests that ignore heteroskedastic and/or breaks tend to favour the EMH. We find that the half-life estimates based on the local-persistent model are short, with the majority of them taking less than six months to absorb half a shock. All in all, the indices examined are largely inconsistent with weak-form efficiency, which implies that the returns on equity portfolios are indeed predictable.
format Article
author Soon, Siew-Voon
Baharumshah, Ahmad Zubaidi
Chan, Tze-Haw
spellingShingle Soon, Siew-Voon
Baharumshah, Ahmad Zubaidi
Chan, Tze-Haw
Efficiency market hypothesis in an emerging market: does it really hold for Malaysia?
author_facet Soon, Siew-Voon
Baharumshah, Ahmad Zubaidi
Chan, Tze-Haw
author_sort Soon, Siew-Voon
title Efficiency market hypothesis in an emerging market: does it really hold for Malaysia?
title_short Efficiency market hypothesis in an emerging market: does it really hold for Malaysia?
title_full Efficiency market hypothesis in an emerging market: does it really hold for Malaysia?
title_fullStr Efficiency market hypothesis in an emerging market: does it really hold for Malaysia?
title_full_unstemmed Efficiency market hypothesis in an emerging market: does it really hold for Malaysia?
title_sort efficiency market hypothesis in an emerging market: does it really hold for malaysia?
publisher Penerbit Universiti Kebangsaan Malaysia
publishDate 2014
url http://psasir.upm.edu.my/id/eprint/37409/
https://www.ukm.my/jurnalpengurusan/article/efficiency-market-hypothesis-in-an-emerging-market-does-it-really-hold-for-malaysia/
_version_ 1781706629393154048
score 13.211869

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