WEAK MARKET EFFICIENCY AND LINEAR REGRESSION MODEL: A CASE STUDY OF CENTRAL AND EASTERN EUROPEAN COUNTRIES

The aim of this paper is twofold: first, it investigates the weak form of market efficiency for the period from 2nd of September 2005 to 31st of August 2011 by using the Augmented Dickey-Fuller and Kwiatkowski-Phillips-Schmidt-Shin unit root procedures and the day-of-the-week methodology. Second, it checks the existence of linear correlation between CEE countries and Western European markets. The results assume that stock markets of some CEE countries follow a unit root. Linear regression model evidences different correlation patterns between CEE and EU old capital markets. The outcomes also show that the-day-of-the-week effect is present on some CEE equity markets.