The Euro and European stock market efficiency
The Euro and European stock market efficiency
This article examines the impact of the introduction of the Euro currency on the market efficiency of 10 of the most developed European stock markets during the period 1988 to 2012. We use an autocorrelation test, a runs test, various formulations of the variance ratio test and the nonlinear BDS test, which are performed on daily data for the full sample period, as well as two subsets dictated by the introduction of the Euro currency. The full sample results are mixed, with the Netherlands accepting market efficiency and Ireland completely rejecting it, with the other markets providing mixed evidence for market efficiency. The subsample period results show that while some markets became more efficient after the introduction of the Euro currency (Spain and Finland) and some markets became more inefficient (France), some were unaffected by the introduction of the Euro (the Netherlands and Italy). Overall our results show that the impact of the Euro currency is mixed, indicating that its introduction was not a decisive factor in the behaviour of stock returns in European markets.
market efficiency, euro currency, predictability, changing efficiency
1235-1248
Urquhart, Andrew
ee369df1-95b5-4cdf-bc24-f1be77357c03
24 June 2014
Urquhart, Andrew
ee369df1-95b5-4cdf-bc24-f1be77357c03
Urquhart, Andrew
(2014)
The Euro and European stock market efficiency.
Applied Financial Economics, 24 (19), .
Abstract
This article examines the impact of the introduction of the Euro currency on the market efficiency of 10 of the most developed European stock markets during the period 1988 to 2012. We use an autocorrelation test, a runs test, various formulations of the variance ratio test and the nonlinear BDS test, which are performed on daily data for the full sample period, as well as two subsets dictated by the introduction of the Euro currency. The full sample results are mixed, with the Netherlands accepting market efficiency and Ireland completely rejecting it, with the other markets providing mixed evidence for market efficiency. The subsample period results show that while some markets became more efficient after the introduction of the Euro currency (Spain and Finland) and some markets became more inefficient (France), some were unaffected by the introduction of the Euro (the Netherlands and Italy). Overall our results show that the impact of the Euro currency is mixed, indicating that its introduction was not a decisive factor in the behaviour of stock returns in European markets.
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Published date: 24 June 2014
Keywords:
market efficiency, euro currency, predictability, changing efficiency
Organisations:
Centre for Digital, Interactive & Data Driven Marketing
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Local EPrints ID: 366343
URI: http://eprints.soton.ac.uk/id/eprint/366343
ISSN: 0960-3107
PURE UUID: 6d91860c-7512-4c89-8138-87d9165cd773
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Date deposited: 25 Jun 2014 10:39
Last modified: 08 Jan 2022 03:21
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Author:
Andrew Urquhart
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