Has the 2008 financial crisis affected stock market efficiency? The case of Eurozone

• We study the effect of the 2008 crisis on Eurozone stock market efficiency.
• The random walk hypothesis is tested via the Generalized Hurst Exponent analysis.
• Dynamic Hurst exponents are estimated through the rolling window technique.
• Statistical significance inference is based on Monte-Carlo sampling.
• We find significant mean-reverting patterns after the 2008 crisis.

In this paper, the impact of the 2008 financial crisis on the weak-form efficiency of twelve Eurozone stock markets is investigated empirically. Efficiency is tested via the Generalized Hurst Exponent method, while dynamic Hurst exponents are estimated by means of the rolling window technique. To account for biases associated with the finite sample size and the leptokurtosis of the financial data, the statistical significance of the Hurst exponent estimates is assessed through a series of Monte-Carlo simulations drawn from the class of αα-stable distributions. According to our results, the 2008 crisis has adversely affected stock price efficiency in most of the Eurozone capital markets, leading to the emergence of significant mean-reverting patterns in stock price movements.