AN INVESTIGATION OF EFFICIENT MARKET HYPOTHESIS IN OECD COUNTRIES

This study aims to investigate whether stock price returns are on a random walk for OECD countries. Using quarterly data for the 2005:1 - 2011:2 period, LM unit root test is employed which endogenously determines up to two structural breaks in level and trend. The empirical findings suggest a combination of random walk and mean reversion results for OECD countries. The results show that efficient market hypothesis (EMH) is confirmed in 13 out of 34 OECD countries. However, with regard to the panel unit root test, the OECD countries share price index returns are mean reverting which highlights the fact that the EMH is not valid.