THE HYPOTHESIS OF EFFICIENT CAPITAL MARKETS: THE CASE OF THE CENTRAL AND EASTERN EUROPEAN STATES

Abstract

This paper investigates whether institutional or regulatory changes determine changes in information efficiency within Central and Eastern European states. To test the implications of the institutional and regulatory resort to a series of tests: autocorrelation, binary cycle type, unit root, dispersions and a test report BDS for profitability but also on an auto regression model. All tests are applied to three different samples: complete sample, ante-code of governance and post-codes of governance. Our results indicate that Central and Eastern European capital markets are not informative enough in any analyzed sample. In fact, we are witnessing partial information efficiency for Slovakia for the entire sample and for the ante codes, while for the post code period Hungary, Slovakia, Romania and the Czech Republic are partly informational efficient. In addition to the samples post codes witnessing an improvement in information efficiency in the markets analyzed, but the result is a combination of several factors: changes in legislation, European integration and the recent financial crisis. Our results indicate that for Central and Eastern European Capital Markets, forecasts can be made about the price evolution of an action based on historical data.