Academic journal article Academy of Accounting and Financial Studies Journal

Are Civets Stock Markets Predictable?

Academic journal article Academy of Accounting and Financial Studies Journal

Are Civets Stock Markets Predictable?

Article excerpt


The main objective of this study is to investigate whether prices in CIVETS stock markets follow a random walk. CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa) is an acronym for favored emerging markets that was coined in late 2009 by Robert Ward, global forecasting director for the Economist Intelligence Unit (EIU).

So, why CIVETS, and is it important to global economy? According to HSBC CEO Michael Geoghegan, CIVETS will be the markets to watch in the next 10 years, after the dynamic growth of the BRIC (Brazil, Russia, India and China) countries in the last decade. The grounds for that are "each has large, young, growing population. Each has a diverse and dynamic economy. And each, in relative terms, is politically stable." The view was supported by EIU, which has suggested more attention be paid in 2010 to CIVETS.

No previous work investigating the random walk hypothesis in the CIVETS stock markets was found. This study covers recent data from the post-global financial crisis era. The efficiency of international financial markets could be affected by such a crisis. Testing recent data helps to verify this. Our analysis incorporates the extended bear-period beginning with the start of the financial crisis in 2008. The study extends the literature by presenting evidence using data from CIVETS, which are favored emerging markets, that has not been previously covered in terms of CIVETS countries as a group and during the global financial crisis. The results of our study should be beneficial to individual investors, institutional investors, and portfolio managers interested in investing in CIVETS, as well as to governments.

The paper is divided into five parts. The first part outlines the CIVETS countries, and provides more information about them. Second, the literature review discusses previous studies conducted on this topic. Third, we explain the data set and methodology. Fourth, we undertake the analysis of our empirical results and discuss it from the perspectives of global investors and governments. Finally, we offer a conclusion.


In this section we will present brief information about each country in CIVETS. The CIVETS group, which encompasses Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa, can be the new investment opportunity for global investors. At the policy level, Indonesia, South Africa, and Turkey are already members of the G20 and are actively involved in setting the development agenda. The CIVETS group has also become a strong voice at recent meetings of the United Nations Development Cooperation Forum. Recent projections indicate that the economic performance of these countries will be very strong over the coming few years. We will outline the CIVETS countries and provide more information about them.

When CIVETS was introduced in 2009 by Robert Ward from EIU and Michael Geoghegan from HSBC, many newspapers and magazines such as Reuters, The Economist, The Wall Street Journal, and the Guardian, we will present some of the information that was mentioned in the previous news agencies.

Colombia is emerging as an attractive destination for investors. Improved security measures have helped per-capita gross domestic product double since 2002. The GDP of Colombia stands at $331,655 million, GDP growth at 5.9%, and the GDP per capita is $7,667. Colombia's sovereign debt has investment grade by all three rating agencies in 2011. In addition, Colombia has substantial oil, coal, and natural gas deposits, and the United States is the Colombia FDI's principal partner. Colombia's pro-business government has been reinvesting oil revenues in infrastructure. Colombia is the third largest exporter of oil to the United States. The country's main industries are oil, textiles, food processing, chemicals, cement, gold, coal, and emeralds. Twenty-eight percent of its young population is 0-14 year-olds. …

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