Speaker
Description
This study investigates the validity of the Efficient Market Hypothesis (EMH) in contemporary financial markets by examining short-term return dynamics across six international equity indices over the period 2015–2025. The analysis aims to assess whether stock returns exhibit serial dependence and whether deviations from the random walk hypothesis persist in modern market conditions characterized by high liquidity, algorithmic trading, and major structural shocks such as the COVID-19 pandemic.
To achieve this objective, the study employs three complementary econometric methods: the Autocorrelation Function (ACF), the Ljung–Box test, and the Variance Ratio test. These methods are used to identify linear autocorrelation, joint serial dependence across multiple lags, and deviations from variance scaling consistent with a random walk process.
The empirical results provide consistent evidence of short-term dependencies across most markets analyzed. While the ACF indicates generally weak autocorrelation at individual lags, the Ljung–Box test reveals statistically significant serial dependence in several indices, particularly Brazil and the United States. Furthermore, the Variance Ratio test strongly rejects the random walk hypothesis across all markets, indicating systematic mean-reverting behavior at short horizons.
These findings suggest that financial markets are not fully efficient in the strict sense of the EMH, particularly over short time intervals. However, the degree of inefficiency varies across markets, with Japan and Poland exhibiting comparatively weaker evidence of dependence. The results also highlight that market efficiency may be sensitive to structural conditions and crisis periods.
Overall, the study contributes to the literature by providing an updated empirical assessment of market efficiency using recent data that includes the COVID-19 period. It offers evidence that short-term predictability persists in modern markets, while also emphasizing the importance of structural breaks and market-specific characteristics in shaping return dynamics.
