Stochastic behaviour of the Athens Stock Exchange: a case of institutional nonsynchronous trading

In this paper it is shown that sequential trading in the Athens Stock Exchange prior to 1989 introduces deterministic nonsynchronicity and causes market returns to exhibit first-order serial correlation even though the underlying price generation process may be a martingale. The effect of deterministic nonsynchronicity is analogous to the effect of stochastic nonsynchronicity examined in Scholes and Williams (1977) with the important exception that it pertains only to portfolio returns and not to single security returns. A test of short run martingale behaviour performed on daily market returns prior to 1989 fails to distinguish between spurious time dependence and nonmartingale behaviour. However, additional evidence based on single security returns points to nonmartingale behaviour.