International Stock Market Efficiency and Integration: A Study of Eighteen Nations

Abstract

This study examines the relationships among stock prices in eighteen national stock markets by using unit root and cointegration tests for the period 1961‐‐92. All the markets were analyzed individually and collectively in regions to test for market efficiency. The results from unit root tests suggest that the world equity markets are weak‐form efficient. The cointegration test results show that there are only a small number of significant cointegrating vectors over the last three decades. However, the number of significant cointegrating vectors increases after the October 1987 stock market crash, a result that is consistent with the contagion effect.