Abstract
Under the Efficient market hypothesis (EMH) for the equity market to be efficient it must reflect all available information in the current equity price as well as the expectation related to the specific available information. However, the arrival of new information, the creation of informational expectation and the uncertainty and unpredictability of future price changes result in an “infinite time varying process” of price equilibrium. The time varying effect resulting from information expectation result in equity market prices, that reflect either an “over- or undervalued” share versus its “fair value”. The “infinite time varying process” related to the flow of information and market efficiency is the result of better information flow over the last two decades resulting in a continuous change in information expectations. The better information flow resulted into more integrated markets both from an economic perspective and from an investment perspective. The closer integration resulted in asset markets are affected by information that has originated from outside the specific country. The reaction of market participants in regards to the informational expectation result in market asymmetry that result in volatility spillover either uni-directional or bidirectional. Furthermore, this also resulted in a closer equity market and investment asset market “connectedness” and the “financialisation” of new or different investable asset classes. The closer “connectedness” and “financialisation” resulted in investment portfolio diversification and risk mitigation opportunities. In this study the informational expectation, asymmetry of information and the volatility spillover was explored in relation to the postulated EMH to determine if information efficiency occur within BRICS and CARBS. The aim of this study was therefore to explore information efficiency among equity markets with similar economic activity in order to identify the resultant portfolio diversification and portfolio management opportunities in times of market inefficiencies. The objectives of this study were firstly, to investigate the “expectation” of the impact of “information” on the DGP within the same market. Secondly, to explore the asymmetry or the lack thereof, in the price reaction resulting from a market informational disturbance and thirdly, to investigate the impact of a volatility spillover between different equity markets...
Ph.D. (Finance)