Measuring capital market efficiency: Correlations structure, crowd behavior and uncertainty
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چکیده
We introduce a new measure for capital market efficiency. The measure takes into consideration the correlation structure of the returns (long-term memory), local herding behavior (information dimension) and uncertainty in the process (entropy). The efficiency measure is then taken as a distance from an ideal efficient market situation. Methodology is applied to a portfolio of 41 stock indices. We find that the most efficient markets are the ones of the UK, the USA (S&P500), France, Germany and Japan and the least efficient are the markets of Indonesia, Venezuela, Malaysia, Sri Lanka and Peru. The inefficiency is mainly driven by a local herding, i.e. a low information (fractal) dimension.
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Measuring capital market efficiency: Global and local correlations structure
We introduce a new measure for the capital market efficiency. The measure takes into consideration the correlation structure of the returns (long-term and short-term memory) and local herding behavior (fractal dimension). The efficiency measure is taken as a distance from an ideal efficient market situation. Methodology is applied to a portfolio of 41 stock indices. We find that the Japanese NI...
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