Are the Transition Stock Markets Efficient?Evidence from Non-Linear Unit Root TestsMübariz HasanovTolga Omay

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Are the Transition Stock Markets Efficient?

Evidence from Non-Linear Unit Root Tests

Mübariz Hasanov Tolga Omay

Department of Economics Hacettepe University

Ankara, Turkey [email protected]

Department of Economics Cankaya University

Ankara, Turkey [email protected]

Abstract

In this paper we address efficiency of eight transition stock markets, namely, Bulgarian, Chinese, Czech, Hungarian, Polish, Romanian, Russian and Slovakian stock markets by testing whether the price series of these markets contain unit root. For this purpose we employ the nonlinear unit root test procedure recently developed by Kapetanios et al. (2003) that has a better power than standard unit root tests when series under consideration are characterised by a slower speed of mean reversion. The results of nonlinear unit root tests indicate that only Bulgarian, Czech, Hungarian and Slovakian price series contain unit root, consistent with weak form efficiency.

JEL Classification: C22, G14.

Keywords: Market Efficiency, Non-linear models, transition markets.

Central Bank Review ISSN 1303-0701 print / 1305-8800 online

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