Efficiency of Asean-5 Markets: An Detrended Fluctuation Analysis

  • Assoc. Prof. Dr. Rui Dias Escola Superior de Ciências Empresarias - Institute Polytechnic of Setúbal, Estefanilha, 2914-503 Setúbal, Portugal & CEFAGE, Universidade de Évora, Palácio do Vimioso (Gab. 224), Largo Marquês de Marialva, 87000-809 Évora, Portugal https://orcid.org/0000-0002-6138-3098
  • Assist. Prof. Dr. Paula Heliodoro Escola Superior de Ciências Empresariais – Institute Polytechnic of Setúbal, Estefanilha, 2914-503 Setúbal, Portugal https://orcid.org/0000-0002-7420-6517
  • Assoc. Prof. Dr. Paulo Alexandre Escola de Ciências Empresariais – Institute Polytechnic of Setúbal, Estefanilha, 2914-503 Setúbal, Portugal https://orcid.org/0000-0003-1781-7036
Keywords: Covid-19, ASEAN-5, long memories, arbitrage, portfolio diversification

Abstract

This study intends to analyse efficiency, in its weak form, in the financial markets of Indonesia, Malaysia, Philippines, Singapore, Thailand (ASEAN-5), and China, during the global pandemic (Covid-19). Different approaches have been undertaken to carry out this analysis in order to determine whether: (i) ASEAN-5 financial markets and China are efficient, in their weak form, during the analysis period? The results indicate that the random walk hypothesis is rejected in all markets. The values of the variance ratios are, in all cases, lower than the unit, which implies that the returns are autocorrelated over time and, there is a reversion to the average, in all indices. In corroboration, the exponents Detrended Fluctuation Analysis (DFA), indicate significant long memories with a larger incidence in the Philippines and Singapore markets, however the Chinese market evidences anti persistence. These results demonstrate that stock prices do not completely reflect the available information and that stock prices movements are not i.i.d. This has implications for investors, as some returns can be expected, creating opportunities for arbitrage and abnormal returns, contrary to the assumptions of random walk and information efficiency. These conclusions also allow market regulators to implement measures to ensure better information in these regional markets.

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Published
2020-11-03
How to Cite
Dias, R., Heliodoro, P. and Alexandre, P. (2020) “Efficiency of Asean-5 Markets: An Detrended Fluctuation Analysis”, Mednarodno inovativno poslovanje = Journal of Innovative Business and Management, 12(2), pp. 13-19. doi: 10.32015/JIBM.2020.12.2.13-19.
Section
Original article