IS A LARGER EQUITY MARKET MORE INFORMATION EFFICIENT? - EVIDENCE FROM INTERVALLING EFFECT

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Abstract

This paper investigates the impact of equity return autocorrelation on financial market efficiency via intervalling effect. A simple model is proposed to show that the degree of intervalling effect is related to the security return autocorrelation. A more general version of Levy and Levhari hypothesis is proposed to find that the degree of the autocorrelations of the security and the market returns determines the existence and the direction of the intervalling effect and the size of the intervalling effect are dependent on the degree of the security autocorrelations. Empirical evidence of the latter is presented.

Keywords: CAPM Beta, Information Efficiency, Intervalling Effect

How to cite this paper: Hong, K. (2016). Is a larger equity market more information efficient? Evidence from intervalling effect. Risk governance & control: financial markets & institutions, 6(3), 36-44. https://doi.org/10.22495/rcgv6i3art6