Are European equity markets efficient? New evidence from fractal analysis

We report an empirical analysis of long-range dependence in the returns of eight stock market indices, using the Rescaled Range Analysis (RRA) to estimate the Hurst exponent. Monte Carlo and bootstrap simulations are used to construct critical values for the null hypothesis of no long-range dependence. The issue of disentangling short-range and long-range dependence is examined. Pre-filtering by fitting a (short-range) autoregressive model eliminates part of the long-range dependence when the latter is present, while failure to pre-filter leaves open the possibility of conflating short-range and long-range dependence. There is a strong evidence of long-range dependence for the small central European Czech stock market index PX-glob, and a weaker evidence for two smaller western European stock market indices, MSE (Spain) and SWX (Switzerland). There is little or no evidence of long-range dependence for the other five indices, including those with the largest capitalizations among those considered, DJIA (US) and FTSE350 (UK). These results are generally consistent with prior expectations concerning the relative efficiency of the stock markets examined. © 2011 Elsevier Inc.

A cautionary tale of two ‘tigers’: Industrial policy ‘lessons’ from Ireland and Hungary?

This paper draws industrial policy lessons for small Central and Eastern European states through a critical evaluation of recent Irish and Hungarian experiences. The paper outlines a ‘holistic view’ of industrial policy before exploring the experiences of the two economies. Whilst both have managed to ‘do’ policy well in some regards, substantial challenges remain in making FDI attraction the centrepiece of industrial policy, as has been highlighted recently. Overall, the paper suggests that wholesale emulation of the Irish and Hungarian approach is problematic for small open CEE states, and that more balanced approaches to development - and hence industrial policy – are warranted.