21. Stock Market Efficiency and Market Microstructure in Emerging Markets

  1. H. Kent Baker and
  2. Halil Kiymaz
  1. Parvez Ahmed

Published Online: 23 AUG 2013

DOI: 10.1002/9781118681145.ch21

Market Microstructure in Emerging and Developed Markets: Price Discovery, Information Flows, and Transaction Costs

Market Microstructure in Emerging and Developed Markets: Price Discovery, Information Flows, and Transaction Costs

How to Cite

Ahmed, P. (2013) Stock Market Efficiency and Market Microstructure in Emerging Markets, in Market Microstructure in Emerging and Developed Markets: Price Discovery, Information Flows, and Transaction Costs (eds H. K. Baker and H. Kiymaz), John Wiley & Sons, Inc., Hoboken, NJ, USA. doi: 10.1002/9781118681145.ch21

Author Information

  1. Associate Professor of Finance, University of North Florida

Publication History

  1. Published Online: 23 AUG 2013
  2. Published Print: 16 AUG 2013

ISBN Information

Print ISBN: 9781118278444

Online ISBN: 9781118681145

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Keywords:

  • market efficiency;
  • random walk;
  • trading rules;
  • index;
  • event study;
  • emerging markets

Summary

This chapter examines the theory and practice of market efficiency in emerging markets. Market efficiency is one of the bedrock principles in financial economics. The absence of any arbitrage profit opportunity is one of the fundamental characteristics of efficient markets. This market efficiency depends on the market microstructure. Transaction costs and transmitting information with low costs are among the structural factors affecting market efficiency. The chapter summarizes empirical evidence on the efficiency in emerging equity markets. Unbiased equity prices help to improve corporate governance. High volatility of the stock market can be a deterrent to investors while increasing the cost of capital. Liquidity in capital markets is also important because it allows savers to buy and sell assets rapidly without affecting stock prices.