International Stock Market Efficiency: A Non-Bayesian Time-Varying Model Approach

TL;DR

This paper introduces a non-Bayesian time-varying VAR model to analyze the dynamic structure of international stock market linkages and efficiency, revealing their evolution over time in relation to historical financial events.

Contribution

It develops a novel non-Bayesian TV-VAR methodology to assess time-varying market efficiency and international linkages in G7 countries, offering new insights into their dynamic behavior.

Findings

Market efficiency and linkages vary over time.

Behavior aligns with major financial events.

Provides a new perspective on international financial dynamics.

Abstract

This paper develops a non-Bayesian methodology to analyze the time-varying structure of international linkages and market efficiency in G7 countries. We consider a non-Bayesian time-varying vector autoregressive (TV-VAR) model, and apply it to estimate the joint degree of market efficiency in the sense of Fama (1970, 1991). Our empirical results provide a new perspective that the international linkages and market efficiency change over time and that their behaviors correspond well to historical events of the international financial system.