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Simulating stock returns under switching regimes - A new test of market efficiency

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  • Meenagh, David
  • Minford, Patrick
  • Peel, David

Abstract

A model of profits switches between four regimes with fixed probabilities,the rationally expected profits stream implies the stock market value. This efficient market model is not rejected by UK post-war time-series behaviour of either profits or the FTSE index.
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Suggested Citation

  • Meenagh, David & Minford, Patrick & Peel, David, 2007. "Simulating stock returns under switching regimes - A new test of market efficiency," Economics Letters, Elsevier, vol. 94(2), pages 235-239, February.
  • Handle: RePEc:eee:ecolet:v:94:y:2007:i:2:p:235-239
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    Cited by:

    1. Michael Hatcher & Patrick Minford, 2016. "Stabilisation Policy, Rational Expectations And Price-Level Versus Inflation Targeting: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 30(2), pages 327-355, April.
    2. Patrick Minford, 2010. "The Banking Crisis: A Rational Interpretation," Political Studies Review, Political Studies Association, vol. 8(1), pages 40-54, January.
    3. ap Gwilym, Rhys, 2010. "Can behavioral finance models account for historical asset prices?," Economics Letters, Elsevier, vol. 108(2), pages 187-189, August.

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    More about this item

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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