Vladimir D. Zamorin Sociocultural Determinants of Capital Market Informational Efficiency: Empirical Analysis

DOI: 10.38050/2078-3809-2025-17-3-131-158

Abstract

The study aims to overcome the limitations of traditional capital market pricing concepts–namely, the Efficient Market Hypothesis (EMH) and behavioral economics–by integrating sociocultural factors into the analysis of informational efficiency. The relevance of this research stems from the insufficient attention paid to the role of cultural characteristics in shaping investor behavior and the institutional environment. The objective of the study is to identify the relationship between cultural dimensions (power distance and individualism, as defined by Hofstede) and the informational efficiency of capital markets. The methodology includes logit and probit regressions, models with nonlinear effects and slope dummy variables, Firth regression for rare events, bootstrap analysis (10,000 iterations), and an instrumental variable model using data from 50 countries. A binary indicator of market efficiency is used as the dependent variable, along with control variables such as GDP per capita, Government Effectiveness index, and level of financial development. The results demonstrate: 1) a consistent positive relationship between individualism and market efficiency; 2) A paradoxical positive relationship between power distance and efficiency, likely linked to the Asian context; 3) the significance of one control variable – financial development level; 4) the dependence on a country’s classification as developed or developing: In developed economies, financial market development drives efficiency; In developing economies, power distance and individualism are key determinants. The scientific novelty lies in demonstrating the multidimensional interaction of cultural, institutional, and economic factors, thereby extending the boundaries of traditional models.

Keywords: Efficient Market Hypothesis, behavioral economics, informational efficiency, power distance, individualism, sociocultural factors, capital markets, logit regression, Hofstede's cultural dimensions.

JEL: G14, G15, Z10.

For citation: Zamorin, V.D.  (2025) Sociocultural Determinants of Capital Market Informational Efficiency: Empirical Analysis. Scientific Research of Faculty of Economics. Electronic Journal, vol. 17, no. 3, pp. 137-164. DOI: 10.38050/2078-3809-2025-17-3-137-164.

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