Please use this identifier to cite or link to this item: http://hdl.handle.net/20.500.12216/152
Title: Are co-integrated stock prices consistent with the efficient market hypothesis?
Authors: Wilson, E.J. 
Marashdeh, H.A. 
Issue Date: 2007
Journal: Economic Record 
Abstract: This paper responds to the unsatisfactory argument that there is no correspondence between co-integration and the efficient market hypothesis. A law of one co-integrating vector of prices is proposed for the exchange rate and domestic and overseas stock prices. Markets must therefore be efficient in long-run equilibrium because no arbitrage opportunities exist. However, arbitrage activity via the disequilibrium error correction allows above-average (risk-adjusted) returns to be earned in the short run. The elimination of these arbitrage opportunities means that stock market inefficiency in the short run ensures stock market efficiency in the long run. © 2007 The Economic Society of Australia.
URI: http://hdl.handle.net/20.500.12216/152
DOI: 10.1111/j.1475-4932.2007.00409.x
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