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Are OECD stock prices characterized by a random walk? Evidence from sequential trend break and panel data models

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Author Info
Paresh Kumar Narayan
Russell Smyth

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Abstract

This paper examines whether stock prices for a sample of 22 OECD countries can be best represented as mean reversion or random walk processes. A sequential trend break test proposed by Zivot and Andrews is implemented, which has the advantage that it can take account of a structural break in the series, as well as panel data unit root tests proposed by Im et al. , which exploits the extra power in the panel properties of the data. Results provide strong support for the random walk hypothesis.

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Article provided by Taylor and Francis Journals in its journal Applied Financial Economics.

Volume (Year): 15 (2005)
Issue (Month): 8 (May)
Pages: 547-556
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Handle: RePEc:taf:apfiec:v:15:y:2005:i:8:p:547-556

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    Other versions:
  3. Russell Smyth, 2003. "Unemployment Hysteresis in Australian States and Territories: Evidence from Panel Data Unit Root Tests," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(2), pages 181-192. [Downloadable!] (restricted)
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  23. Karlsson, Sune & Lothgren, Mickael, 2000. "On the power and interpretation of panel unit root tests," Economics Letters, Elsevier, vol. 66(3), pages 249-255, March. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Paresh Kumar Narayan, 2005. "Are the Australian and New Zealand stock prices nonlinear with a unit root?," Applied Economics, Taylor and Francis Journals, vol. 37(18), pages 2161-2166, October. [Downloadable!] (restricted)
  2. Chancharat,Surachai & Valadkhani, Abbas, 2007. "An Empirical Analysis of the Thai and Major International Stock Markets," Economics Working Papers wp07-13, School of Economics, University of Wollongong, NSW, Australia. [Downloadable!]
  3. Shyh-Wei Chen, 2008. "Non-stationarity and Non-linearity in Stock Prices: Evidence from the OECD Countries," Economics Bulletin, Economics Bulletin, vol. 3(11), pages 1-11. [Downloadable!]
  4. Paresh Kumar Narayan & Russell Smyth, 2006. "Random walk versus multiple trend breaks in stock prices: evidence from 15 European markets," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 2(1), pages 1-7, January. [Downloadable!] (restricted)
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