Directional Asymmetry in Market Efficiency: How Emerging Markets Respond to Global Crises

Despite extensive research on market efficiency, there is limited study about whether efficiency deteriorates asymmetrically during upturns versus downturns in emerging markets and particularly during global crises. This study examines asymmetric efficiency dynamics in 10 major emerging equity markets from 2015 to 2025, encompassing the COVID-19 pandemic and the Russia–Ukraine conflict. We apply Asymmetric Multifractal Detrended Fluctuation Analysis (MF-DFA) and the Market Deficiency Measure (MDM) to assess directional persistence, multifractality and deviations from weak-form efficiency. MF-DFA captures long-memory and scaling properties, while MDM quantifies the degree of deviation from weak-form efficiency across the full distribution of return fluctuations. MF-DFA results confirm clear asymmetric efficiency patterns, with upward and downward scaling exponents diverging across all markets. Turkey and South Africa show stronger sensitivity to negative returns, whereas China and Taiwan display milder directional gaps. Rolling Hurst exponents reveal that market efficiency varies over time, with pronounced changes during crisis periods. MDM results show crisis-related changes in efficiency during both COVID-19 and the Russia–Ukraine conflict, with the magnitude and direction of MDM shifts varying across markets. Mexico and Malaysia record smaller deviations, remaining closer to weak-form efficiency. This study contributes by documenting that emerging market efficiency deteriorates asymmetrically during crises, with downside movements showing greater persistence. Findings suggest that regulatory surveillance frameworks and investor risk management strategies may benefit from incorporating directional efficiency measures, as downside scaling persistence differs systematically from upside scaling across markets and crisis episodes.