New empirical evidence on E.M.H.: case of developed and emerging markets – a microeconomic approach
New empirical evidence on E.M.H.: case of developed and emerging markets – a microeconomic approach

Summary/Abstract: In today’s globalized world, with interconnected global markets, and implicitly a higherlevel of sensitivity, one of the most important issues to be addressed is represented by theway market mechanisms are functioning. The main purpose of the present study is toanswer the question of whether the selected markets are consistent with the EfficientMarket Hypothesis, at a microeconomic level, by creating an Efficiency Index, using L.Kristoufek si M. Vosvrda (L. Kristoufek, M. Vosvrda, 2013, 184) method.We use estimators of long term memory, fractal dimension, and approximate entropy, inorder to create the Efficiency Index. The results are commented both at a macroeconomiclevel and at a microeconomic level, as we apply the methodology on 150 companies, partof 12 stock market indices from developed and emerging economies. We find that theresults are consistent with those obtained by L. Kristoufek si M. Vosvrda (L. Kristoufek,M. Vosvrda, 2013, 184), with most of the efficient companies being part of the developedmarkets, while the least efficient companies part of emerging economies. This implies theexistence of a market dynamics characterized by going through areas with distinctive levelsof “informational efficiency”.The present study contributes to a better understanding of financial market mechanisms at amicroeconomic level, by testing the Efficient Market Hypothesis, and constructing theEfficiency Index.

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