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Title: Predictability in securities price formation : differences between developed and emerging markets
Authors: Camilleri, Silvio John
Vassallo, Semiramis
Bai, Ye
Keywords: Prices -- Mathematical models
International economic integration
Investments, Foreign
Liquidity (Economics)
Fixed-income securities
Stock exchanges
Business enterprises
Issue Date: 2020
Publisher: Emerald
Citation: Camilleri, S. J., Vassallo, S., & Bai, Y. (2020). Predictability in securities price formation: differences between developed and emerging markets. Journal of Capital Markets Studies. 4(2), 145-166.
Abstract: This paper examines whether there are differences in the nature of the price discovery process across established versus emerging stock markets using a twenty-country sample. Daily returns are analysed for traces of predictability or non-randomness using variance ratio tests, Granger-Causality models and runs tests. The findings pin-point at predictabilities which seem inconsistent with market efficiency, and they suggest that the inherent cause of predictability differs across groups. Whilst the pricing process in emerging markets may be hindered by delayed adjustments, in case of established markets it seems that there is a higher tendency for price reversals which could be due to prior over-reactions.
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