SOAS Research Online

Abstract

The degree of return predictability is measured for 40 Bulgarian stocks, two Bulgarian stock market indices and 13 other South East European stock market indices using three finite-sample variance ratio tests. Daily data corrected for infrequent trading are used in a fixed-length rolling window to capture short-horizon predictability and rank Bulgarian stocks and South East European stock market indices by relative predictability. Overall, the degree of return predictability for both stocks and stock market price indices varies widely. For Bulgarian stocks, the degree of predictability is greater the less liquid is the market for a particular stock. For market indices, the degree of predictability is negatively related to capitalization, liquidity and market quality; small, new, relatively illiquid and less-developed stock markets are more predictable than large, liquid, developed markets.