The dynamics of market efficiency

Dominik Rosch, A Subrahmanyam, Mathijs van Dijk

Research output: Contribution to journalArticleAcademicpeer-review

41 Citations (Scopus)


We study the dynamics of high-frequency market efficiency measures. We provide evidence that these measures comove across stocks and with each other, suggesting the existence of a systematic market efficiency component. In vector autoregressions, we show that shocks to funding liquidity (the TED spread), hedge fund assets under management, and a proxy for algorithmic trading are significantly associated with systematic market efficiency. Thus, stock market efficiency is prone to systematic fluctuations, and, consistent with recent theories, events and policies that impact funding liquidity can affect the aggregate degree of price efficiency.
Original languageEnglish
Pages (from-to)1151-1187
Number of pages37
JournalThe Review of Financial Studies
Issue number4
Publication statusPublished - 2017


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