Rui Dias – Escola Superior de Ciências Empresariais – Instituto Politécnico de Setúbal, Portugal & CEFAGE, Universidade de Évora, Portugal
Paula Heliodoro – Escola Superior de Ciências Empresariais – Instituto Politécnico de Setúbal, Portugal
Paulo Alexandre – Escola Superior de Ciências Empresariais – Instituto Politécnico de Setúbal, Portugal
Rita Silva – Escola Superior de Ciências Empresariais – Instituto Politécnico de Setúbal, Portugal
6th International Scientific-Business Conference – LIMEN 2020 – Leadership, Innovation, Management and Economics: Integrated Politics of Research – SELECTED PAPERS, Online/virtual, November 26, 2020, published by the Association of Economists and Managers of the Balkans, Belgrade; Printed by: SKRIPTA International, Belgrade, ISBN 978-86-80194-40-0, ISSN 2683-6149, DOI: https://doi.org/10.31410/LIMEN.S.P.2020
The COVID-19 outbreak caused several concerns all over the world. On January 30, 2020, the World Health Organization (WHO) declared it a global health emergency. This outbreak leads to a drastic change in people’s lifestyles, causing lots of job losses all over the world and threaten the livelihood of millions of people since the firms closed to avoid virus propagation. In general, all economic activities were interrupted, and the stock markets had significant breaks. Due to these events, this essay pretends to analyse the efficiency, in its weak form, in the stock market indexes of France (CAC40), China (SSEC), South Korea (KOSPI), Germany (DAX 30), Italy (FTSE MID), Portugal (PSI 20), and Spain (IBEX 35), in the period of December 31, 2019, to August 10, 2020. To accomplish this research, different approaches were taken to analyse whether: (i) the countries affected by the global pandemic (COVID-19) caused (in) efficiency in their stock markets? The results suggest that the hypothesis of random walk in all the markets under study was rejected. Variance ratios’ values are, in all cases, lower than the unity, which implies that the returns are auto correlated over time, and there is a reversion to the mean, in all indexes. The exponents Detrended Fluctuation Analysis (DFA), indicate significant long memories, i.e. they validate the results of the non-parametric test of Wright (2000), which comprises two types of tests, the Position test (Rankings) for homoscedastic series, and the Signal test for heteroscedastic series. These findings show that prices do not fully reflect the information available and that changes in prices are not independent and identically distributed. This situation has implications for investors since some returns can be expectable, creating opportunities for arbitrage and abnormal earnings. These conclusions also open space for market regulators to take measures to ensure better information in these regional markets.
Global pandemic, Efficiency, Arbitrage.
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