The influence of liquidity on informational efficiency: The case of the Thai Stock Market

The presence of long-range memory in financial time series is a puzzling fact that challenges the established financial theory. We study the effect of liquidity on the efficiency (measured by the Hurst’s exponent) of the Thai Stock Market. According to our study, we find that: (i) the R / S method could generate spurious long-range dependence, giving the DFA method more reliable estimates of the Hurst’s exponent and (ii) there is a weak relationship between market capitalization and the efficiency of the market, and that the latter is not significantly affected by the presence of foreign investors.