INVESTIGATION OF WEAK-FORM EFFICIENCY IN THE CEE REGION APPLYING VARIANCE RATIO TEST

We test weak form efficiency for the Central and Eastern European stock markets applying variance ratio test. We investigate the price changes of seven CEE markets (Austria, Hungary, Estonia, the Czech Republic, Poland, Romania, Slovakia) for the period 1991-2011. In order to make the results for these markets directly comparable with results for other developed markets, Germany, United Kingdom and the USA were also incorporated. Our results present contrarian pricing behavior in the investigated countries while instead of the mean reverting (negative autocorrelation) pricing process experienced in the US or in the UK we measure positive autocorrelation especially in the early years of the investigated stock exchanges. However we document continuous development in the efficiency of pricing. Our results show that if the prices are recalculated in USD the significance of inefficiency measures are weakening or even vanishing.