DP2134 | Does Market Organization Speed Up Market Stabilization? First Lessons From the Budapest and Warsaw Stock Exchanges


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This paper investigates whether different systems of financial market organization influence the way in which newly created stock markets become more (weak-form) efficient. The author conducts a detailed comparative analysis of stocks listed on the Budapest and Warsaw Stock Exchanges, 1991-98, and demonstrates that an auction market (with call trading) becomes efficient more quickly than a dealer market (with continuous trading). As an econometric tool for comparative analysis, she uses a Test for Evolving Efficiency which is a GARCH-M model with time-varying constraints.