IDEAS home Printed from https://ideas.repec.org/a/shc/jaresh/v7y2015i3p385-392.html
   My bibliography  Save this article

Revisit The Ar(1) Model For The Returns From Djia

Author

Listed:
  • PETER REN

Abstract

Two overlooked points for the suggested AR(1) model in the research of Brock, Lakonishok, and LeBaron (1992) are discussed in this paper. First, Durbin’s h statistic shows that the error terms from the AR(1) process for the returns of DJIA are correlated. Secondly, the coefficient of determination is low at 0.2% for the returns from DJIA. In other words, the model suggested can only explain 0.2% of the variation of DJIA. Therefore, the AR(1) model is not an ideal representative for the returns from the price index. In fact, our study shows that the DJIA price index itself has a random walk like process with uncorrelated error terms but not necessarily i.i.d. This study concludes the market is not predictable.

Suggested Citation

  • Peter Ren, 2015. "Revisit The Ar(1) Model For The Returns From Djia," Journal of Academic Research in Economics, Spiru Haret University, Faculty of Accounting and Financial Management Constanta, vol. 7(3 (Decemb), pages 385-392.
    • Handle: RePEc:shc:jaresh:v:7:y:2015:i:3:p:385-392
    as

    Download full text from publisher

    File URL: http://www.jare-sh.com/downloads/abstract_dec_2015/ren.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    AR(1) process; DJIA price index; Durbin’s h statistic; Efficient Market; random walk;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:shc:jaresh:v:7:y:2015:i:3:p:385-392. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Claudiu Chiru (email available below). General contact details of provider: https://edirc.repec.org/data/fcuspro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.