An Examination of Structural Change and Nonlinear Dynamics in Emerging Equity Markets‪.‬

ABSTRACT Recent equity market collapses in many emerging nations have made many of these markets the subject of much concern. Several emerging nations underwent a dramatic overhaul of their financial infrastructure in the 1990s as a result of radical changes in regulatory attitudes. This study uses nonlinear dynamics to examine whether such regime changes have made these capital markets more efficient in recent years. This study examines ten emerging countries' equity markets, i.e. Argentina, Chile, Jordan, Korea, Malaysia, Mexico, Philippines, Taiwan, Thailand, and Turkey using daily data covering the periods 1988-1992 and 1999-2003. Informational efficiency for each examined stock market over each examined subperiod is gauged by the extent of stochastic and deterministic nonlinear predictability inherent in the market. Results indicate that the hypothesized financial regime changes during the 1990's have had no conclusive impact on the examined nonlinear predictability of these markets. The good news is that no compelling evidence was uncovered to suggest that any of the examined markets have become less informationally efficient over the ensuing period.