Efficiency Market Hypothesis in an Emerging Market: Does It Really Hold for Malaysia?
Kecekapan Pasaran Hipotesis dalam Pasaran Baru Muncul: Adakah la Benar-benar Sesuai untuk Malaysia?

Faculty of Economics and Management
Universiti Putra Malaysia
43400 UPM Serdang, Selangor, MALAYSIA.

sv_soon2001@yahoo.com

Faculty of Economics and Management
Universiti Putra Malaysia
43400 UPM Serdang, Selangor, MALAYSIA.

baharumshah@yahoo.com/zubaidi@.upm.edu.my

Graduate School of Business
Universiti Sains Malaysia
11800 USM Penang, MALAYSIA.

thchan@usm.my

Abstract

This study revisits the efficient market hypothesis (EMH) with regard to the Kuala Lumpur Stock Exchange (KZSE) at the sectoral level. Based on Liu and Narayan’s (2011) GARCH-based unit-root with structural breaks test, the unit-root null is rejected for all except one sector. By contrast, models based on commonly used unit-root tests that ignore heteroskedastic and/or breaks tend to favour the EMH. We find that the half-life estimates based on the local-persistent model are short, with the majority of them taking less than six months to absorb half a shock. All in all, the indices examined are largely inconsistent with weak-form efficiency, which implies that the returns on equity portfolios are indeed predictable.

Keywords

half-life; stock prices; structural breaks; unit-root

Citation

Soon, S. V., Baharumshah, A. Z., & Chan, T. H. (2014). Efficiency Market Hypothesis in an Emerging Market: Does It Really Hold for Malaysia?. Jurnal Pengurusan, 42, 31–42.

@article{soon2014efficiency,
  title={Efficiency Market Hypothesis in an Emerging Market: Does It Really Hold for Malaysia?},
  author={Soon, Siew-Voon and Baharumshah, Ahmad Zubaidi and Chan, Tze-Haw},
  journal={Jurnal Pengurusan},
 

volume={42},
  number={},
  pages={31—42},
  year={2014},
  doi={},
  publisher={Penerbit UKM},
}

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42 (2014) 31 – 42

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