Financialization and return predictability: evidence from Hong Kong equity market

Many studies have examined the weak-form efficiency, which is an element of efficient market hypothesis (EMH), of Hong Kong equity market, but do not reach a consensus so far. The conflicted findings of extant studies on Hong Kong equity market efficiency might be explained by different sample periods employed in their empirics, suggesting the possibility that weak-form efficiency is time-varying. Hence, this study attempts to test the presence of time-varying market efficiency in Hong Kong and the influence of time-varying financialization on the weak-form efficiency of Hong Kong equity market. Specifically, our research questions are 1) whether weak-form efficiency of Hong Kong equity market is time-varying; and 2) does financialization explain the time-varying market efficiency in Hong Kong?