Emerging insights: Unveiling market efficiency in Mongolia's transforming economy

Authors

DOI:

https://doi.org/10.15549/jeecar.v11i6.1834

Keywords:

Mongolian Stock Exchange, Efficient Market Hypothesis, transparency, random walk theory

Abstract

The Efficient Market Hypothesis (EMH) posits that stock prices reflect all available information, preventing consistent outperformance in strong-form efficient markets. However, in inefficient markets, investors can achieve higher returns by exploiting informational advantages. This study evaluates whether the Mongolian capital market is weak-form efficient. Although the Mongolian Stock Exchange (MSE) has grown since its 1991 inception, it remains under-researched. Our analysis focuses on the MSE Top 20 Index's most frequent constituents between 2012 and 2023, assessing if their returns are independent and align with the random walk model—a characteristic of developed markets like the U.S. Using daily stock returns, we conducted statistical tests, including non-parametric (Kolmogorov-Smirnov for normality, Run test) and parametric analyses (autocorrelation under the random walk model). Results compellingly reject the random walk hypothesis, indicating weak-form inefficiency. This inefficiency implies a potential for investors to realize abnormal returns, especially through momentum-based strategies, challenging the EMH. Findings were consistent across three market cycles, enhancing robustness. Future research could apply advanced econometric models and compare results with other markets, offering deeper insights into the MSE's characteristics. This study opens new directions for strategic trading and market analysis within the Mongolian capital market.

Author Biographies

Erdenechuluun Jargalsaikhan, University of Finance and Economics, Mongolia

Erdenechuluun Jargalsaikhan is a faculty member at the University of Finance and Economics in Mongolia. He earned a Master's degree at KDI School. His scholarly pursuits center on capital markets, public policy, and management and finance. Prior to his academic appointment at the University of Finance and Economics, he held a consulting position at KPMG.

Dagvasuren Ganbold, University of Finance and Economics, Mongolia

Dagvasuren Ganbold serves as a lecturer at the University of Finance and Economics in Mongolia while concurrently pursuing his doctoral degree. He holds a Master of Science degree from the National University of Mongolia, specializing in financial econometrics and the economics of crime. Mr. Dagvasuren possesses extensive expertise in these fields and boasts a distinguished record in both lecturing and research, accumulating over a decade of experience in statistics and economics.

Chansoo Park , Memorial University of Newfoundland, Canada

Dr. Chansoo Park currently serves as an Associate Professor at the Faculty of Business Administration, Memorial University of Newfoundland, Canada. His academic interests include strategic management, international business, organizational behaviour, and organizational theory.

Young-Rae Kim, University of Finance and Economics, Mongolia

Dr. Young-Rae Kim is a professor at the University of Finance and Economics in Mongolia. His academic interests include the application of economic geography in business and economics in the contexts of developing countries.

Junguk Kim, Mongolia International University (MIU), Mongolia

Dr. Junguk Kim (Business Administration) holds the position of Professor at Mongolia International University (MIU) in Mongolia. His scholarly endeavors primarily revolve around Financial Management, Business Analytics, and Risk Management.

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Published

2024-11-22

How to Cite

Jargalsaikhan, E., Ganbold, D., Park , C., Kim, Y.-R., & Kim, J. (2024). Emerging insights: Unveiling market efficiency in Mongolia’s transforming economy. Journal of Eastern European and Central Asian Research (JEECAR), 11(6), 1030–1042. https://doi.org/10.15549/jeecar.v11i6.1834

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Vol. 11 No. 6 (2024): Journal of Eastern European and Central Asian Research

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Copyright (c) 2024 Erdenechuluun Jargalsaikhan, Dagvasuren Ganbold, Chansoo Park , Young-Rae Kim, Junguk Kim

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