Time variation in market efficiency Empirical evidence from B3 sectoral indices (2016-2024)
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Abstract
This study investigates the time-varying degree of (in)efficiency in the Brazilian stock market by analyzing long-range dependence in the returns and volatilities of seven B3 sectoral indices from January 2016 to July 2024. The semiparametric Geweke and Porter-Hudak (GPH) estimator of the fractional integration parameter is employed, combined with rolling window procedures and Bai-Perron structural break tests. The results show that returns predominantly exhibit short memory behavior, consistent with the weak form of the Efficient Market Hypothesis. In contrast, volatilities display temporary long memory during the peak of the COVID-19 pandemic, followed by a gradual reduction in persistence. The findings are consistent with the Fractal Market Hypothesis and the Adaptive Market Hypothesis, suggesting that systemic shocks temporarily affect market efficiency dynamics without generating permanent structural changes.
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References
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