A Conceptual Model of Stock Market Efficiency: Does Economic Uncertainty Matter?

Many empirical works study the efficient market hypothesis by examining the relationship between the macroeconomic factors and the stock markets, however, there are scant studies focused on the economic uncertainty in a precise method by studying the stock market efficiency. The purpose of this paper is to propose the conceptual framework of stock market efficiency in economic uncertainty. The economic uncertainty, can be categorized into exchange rate uncertainty, monetary policy uncertainty (namely, interest rate uncertainty, money supply uncertainty), inflation uncertainty, and output uncertainty, and is associated with the stock market efficiency. The expected findings suggest that economic uncertainty contains useful information and is important in determining the stock market efficiency and could promote a better efficiency in stock market.