Predictability in securities price formation: differences between developed and emerging markets

Silvio John Camilleri*, Semiramis Vassallo, Ye Bai

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)


Purpose: This paper examines whether there are differences in the nature of the price discovery process across established versus emerging stock markets using a twenty-country sample. Design/methodology/approach: The authors analyse security returns for traces of predictability or non-randomness using variance ratio tests, Granger-Causality models and runs tests. Findings: The findings pinpoint at predictabilities which seem inconsistent with market efficiency, and they suggest that the inherent cause of predictability differs across groups. Research limitations/implications: The authors present empirical evidence which may be used to attain a deeper understanding of the links between predictability and market efficiency, in view of the conflicting evidence in prior literature. Practical implications: Whilst the pricing process in emerging markets may be hindered by delayed adjustments, in case of established markets it seems that there is a higher tendency for price reversals which could be due to prior over-reactions. Originality/value: This study presents evidence of substantial differences in predictability across developed and emerging markets which was gleaned through the rigorous application of different empirical tests.

Original languageEnglish
Pages (from-to)145-166
Number of pages22
JournalJournal of Capital Markets Studies
Issue number2
Publication statusPublished - 15 Dec 2020


  • Delayed price adjustments
  • Emerging markets
  • Granger-causality
  • Liquidity
  • Over-reactions
  • Predictability
  • Price discovery
  • Runs tests
  • Variance ratio tests
  • Vector autoregression


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