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Title: Time series properties of emerging and developed stock markets : an analysis and comparison
Author: Poshakwale, Sunil
Awarding Body: University of Manchester
Current Institution: University of Manchester
Date of Award: 1997
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Using time series analysis, this research provides an approximation of the market dynamics in emerging and developed stock markets. A number of potential risks arising from a range of informational, structural and regulatory features in emerging markets are investigated by taking stock market efficiency as the central concern. Comparative empirical evidence on some of the established anomalies in developed markets is provided for both long standing and recently established emerging markets. The findings suggest that despite perceptions of instability, volatility, and inefficiency emerging markets do not appear to significantly differ in return and risk characteristics from the developed markets considered in this study. Daily returns in both developed and emerging markets appear to violate weak-form efficiency and exhibit day of the week effects. The volatility of the emerging and developed stock markets can be commonly characterised by the presence of persistent shocks and time varying volatility. Even at the individual stock level emerging and developed markets exhibit similar time series features. Daily returns from two of the newly emerging markets also indicate volatility features which are not significantly different from longer established emerging markets and mature developed markets. This research has shown that despite the heterogeneity of systems and investors, return and risk characteristics of stocks from emerging markets appear similar to the developed markets with comparable evidence of time dependence in volatility and returns. The findings of this research have several interesting theoretical and practical implications. First, modern infrastructure and regulations do not appear to have any significant influence on return and volatility characteristics. As documented in this study, even a newly re-established and modern Polish market can support return and volatility characteristics that are consistent with the notion of noise or speculative trading. This suggests that even though markets may have necessary facilities for efficient operation, stock prices may not be consistent with statistically defined market efficiency. Secondly, strictly from the point of view of informational market efficiency, emerging markets do not appear to be significantly different from developed markets, other than in respect of size. This may suggest that perhaps the "emerging markets phenomenon" needs to be reviewed. Thirdly, the Chinese case shows that it is not sufficient to merely have appropriate regulations in place to attract foreign equity investment. Market depth and liquidity are two further factors which influence the decisions of the foreign institutional investors. Last, daily returns in both emerging and developed markets appear to show significant and comparable nonlinearity suggesting that risk cannot be measured by the conventional models of equilibrium.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available