Overview of Banja Luka Stock Exchange Market before and after the Global Financial Crisis

Banja Luka Stock Exchange is one of the two stock exchange markets in Bosnia and
Herzegovina established in 2000 as part of the mass privatization processes. First
years of market operation were signified by relatively large market capitalization and
high number of listed companies. With the beginning of grand financial crisis the
market capitalization and the value of the stock exchange benchmark index – BIRS
were on a decline. This study aims at measuring the weak-form efficiency of the BIRS
index over two periods - prior to the crisis and after the crisis begun. The multiple
break point models indicate that there was a significant change in the series of index
value on October 2, 2008. The serial correlation test and Autoregression model were
used to examine the level of market efficiency in each period. The results suggest that
market remains inefficient through with increase in inefficiency during the second
period. These results coupled with the evidence of high vulnerability of the market to
volatility shocks, modeled using EGARCH once again confirm that the emerging and
frontier markets are much more sensitive to the crisis and take longer to recover from
its effects.