Is South Korea's stock market efficient? Evidence from a nonlinear unit root test

Abstract

In this article we re-examine efficiency of the South Korea's stock market, extending recent work of Narayan and Smyth (2004). For this purpose we apply the nonlinear unit root test procedure recently developed by Kapetanios et al. (2003). The nonlinear unit root test rejects the null hypothesis of unit root, suggesting that the South Korea's stock market is not weak form efficient, contrary to the findings of Narayan and Smyth (2004).

Notes

¹ For a thorough discussion of STAR models see Granger and Teräsvirta (1993), Teräsvirta (1994), van Dijk (1999) and Franses and van Dijk (2000).

² To save space, we do not provide estimates of AR models and of the regression (9) here. These estimates as well as the estimates of the augmentation terms in regression (8) are available upon request.