Evolving efficiency of the BRICS markets

Abstract

This paper investigates a time-varying version of weak-form market efficiency in the BRICS countries. A moving window test for sample autocorrelations is applied alongside a Kalman filter approach to recover the hidden dynamics of the market efficiency process through appropriate time-varying autoregressive models with both homoscedastic and heteroscedastic conditional variance. Monthly data covers the period from January 1995 to December 2020, which includes the 2008-2009 global financial crisis and the recent COVID-19 recession. The results reveal that all the BRICS stock markets were affected during both periods, but generally remained weak-form efficient, with the exception of China.