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Market efficiency, thin trading and non-linear behaviour: Emerging market evidence from Sri Lanka

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dc.title Market efficiency, thin trading and non-linear behaviour: Emerging market evidence from Sri Lanka en
dc.contributor.author Pathirawasam, Chandrapala
dc.contributor.author Idirisinghe, I.M.S.K.
dc.relation.ispartof E+M Ekonomie a Management
dc.identifier.issn 1212-3609 Scopus Sources, Sherpa/RoMEO, JCR
dc.date.issued 2011
utb.relation.volume 14
utb.relation.issue 1
dc.citation.spage 112
dc.citation.epage 122
dc.type article
dc.language.iso en
dc.relation.uri http://www.ekonomie-management.cz/archiv/vyhledavani/detail/737-market-efficiency-thin-trading-and-non-linear-behavior-emerging-market-evidence-from-sri-lanka/
dc.subject Colombo stock exchange en
dc.subject Efficiency en
dc.subject Non-linearity en
dc.subject Thin-trading en
dc.description.abstract This paper investigates the efficiency of Colombo Stock Exchange (CSE) taking into account the possibility of non-linearities in the price time series, and thin trading characteristics of the Sri Lankan stock market. We use the data on the All Share Price Index (ASPI) for the period from January 1990 to December 2009. We use an AR(I) model to estimate the residuals of the AR(I) equation, and then adjust the returns for thin trading. In addition to that an augmented logistic equation model is used as a basis for investigation to take into account the nonlinearity in the data. The study finds significant autocorrelations in the unadjusted daily market returns for thin trading for the period of 1990 to 2009. However, the above predictability is removed when we use thin trading adjusted returns to the model. After incorporating non- linear components into the model, we find that statistically significant non linearity in the CSE after and before adjusting returns for thin trading. Therefore, we can conclude that the inefficiency observed at CSE during the sample period is manifested through non-linear behaviour of stock returns. We further examine the models on annual sub-sets of the index data in order to investigate the effectiveness of market regulatory changes on market efficiency at CSE. Unlike the other emerging markets we do not see that regulatory changes have significantly encouraged investor participation, improved information quality and reflected new information more rapidly in share prices. Therefore, further measures are necessary to improve the informational efficiency of the CSE. In this regards allowing short sales and introducing risk hedging derivative securities to the market would be effective. en
utb.faculty Faculty of Management and Economics
dc.identifier.uri http://hdl.handle.net/10563/1002351
utb.identifier.rivid RIV/70883521:28120/11:43865225!RIV12-MSM-28120___
utb.identifier.obdid 43865227
utb.identifier.scopus 2-s2.0-79952820800
utb.identifier.wok 000296411900009
utb.source j-scopus
dc.date.accessioned 2011-09-30T00:09:55Z
dc.date.available 2011-09-30T00:09:55Z
dc.rights Attribution-NonCommercial 4.0 International
dc.rights.uri http://creativecommons.org/licenses/by-nc/4.0/
dc.rights.access openAccess
utb.contributor.internalauthor Pathirawasam, Chandrapala
utb.contributor.internalauthor Idirisinghe, I.M.S.K.
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