Are frontier stock markets more inefficient than emerging stock markets?
International Journal of Monetary Economics and Finance, vol.6, no.4, pp.271-284, 2013 (Scopus)
- Publication Type: Article / Article
- Volume: 6 Issue: 4
- Publication Date: 2013
- Doi Number: 10.1504/ijmef.2013.059943
- Journal Name: International Journal of Monetary Economics and Finance
- Journal Indexes: Scopus
- Page Numbers: pp.271-284
- Keywords: ARFIMA, Autoregressive fractionally integrated moving average, Diversification, Efficiency, Emerging markets, FIGARCH, Fractionally integrated generalised autoregressive conditional heteroscedasticity, Frontier markets, Long memory
- Dokuz Eylül University Affiliated: Yes
Abstract
This paper investigates the presence of long memory in MSCI's Frontier and Emerging Market Indices, using autoregressive fractionally integrated moving average (ARFIMA) and fractionally integrated generalised autoregressive conditional heteroscedasticity (FIGARCH) models. The concept of 'long memory' has become important recently in financial academic research. Long memory tests are carried out both for the returns and volatilities of these series. Results of the ARFIMA models indicate the existence of long memory in Frontier markets return series. Presence of long memory properties in return series is indicative of inefficiency or efficiency in stock markets, and therefore, are useful to investors interested in diversifying their portfolios. On a risk return basis, frontier and emerging markets may provide a better outcome for portfolio managers. Copyright © 2013 Inderscience Enterprises Ltd.