Integration and efficiency for local and regional equity markets during the global financial crisis

Abstract

The aim of this paper is to study the link between the market integration and informational efficiency in the local and regional market, while taking into account the global financial crisis. In fact, we employ the methodological approach adopted by Hooy and Lim (2013). On a sample of 29 countries and 4 regions over the period between 1994 and 2016 divided into three phases: the pre- crisis period, 1994-2006, the crisis period, 2007-2009 and the post-crisis period, 2010-2016.  Our results showed that the markets that are more integrated with the US market are also more efficient, which implies that this association is positive and significant in the sub-sample of local and regional emerging stock markets. On the other hand, this association lost its explanatory power during the crisis period as well as when the emerging stock markets is more volatile than their developed counterparts. The results also revealed that the political efforts being made for the market integration and informational efficiency should be complementary as the two policy goals are closely related