Efficient market hypothesis in the Nordic and US stock markets

Abstract

This study examines the weak-form market efficiency of stock market indexes in Norway, Denmark, Finland, Sweden, and the USA from January 2009 to December 2023. To evaluate this, we employ a runs test and various variance ratio tests using weekly data for the full period and two subperiods (2009–2015 and 2016–2023). The analysis reveals that weekly returns exhibit conditional heteroscedasticity. Our findings provide mixed support for the Efficient Market Hypothesis (EMH), with a trend towards less inefficiency in more recent times. When focusing solely on the heteroscedastic test, Finland and Sweden show signs of inefficiency, thereby disproving the weak form of market efficiency. Our comparison between the Nordic countries and the USA indicates that the Nordic markets are highly inefficient, while the US market is highly efficient regarding weak form market efficiency.