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Are emerging stock market price indices really stationary?

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  • Chanwit Phengpis
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    Abstract

    This study re-examines the univariate property of stock market price indices in ten emerging markets which are evidenced by prior empirical work, specifically by Chaudhuri and Wu (2003), to be I(0) or stationary. Important findings from variants of standard Dickey and Fuller (1979, 1981) and Zivot and Andrews (1992) unit root tests include: (1) the majority of these price indices can be more appropriately regarded as I(1) or non-stationary, and (2) the I(1) processes in these price indices have been increasingly discernible over time. These results imply non-mean reversion in stock market prices and unpredictability based on past prices in the majority of emerging stock markets under investigation.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/09603100500386099
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    Bibliographic Info

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

    Volume (Year): 16 (2006)
    Issue (Month): 13 ()
    Pages: 931-939

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    Handle: RePEc:taf:apfiec:v:16:y:2006:i:13:p:931-939

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    1. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    2. Phillips, P.C.B., 1986. "Testing for a Unit Root in Time Series Regression," Cahiers de recherche 8633, Universite de Montreal, Departement de sciences economiques.
    3. Richards, Anthony J., 1995. "Comovements in national stock market returns: Evidence of predictability, but not cointegration," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 631-654, December.
    4. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
    5. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    6. Nunes, Luis C & Newbold, Paul & Kuan, Chung-Ming, 1997. "Testing for Unit Roots with Breaks: Evidence on the Great Crash and the Unit Root Hypothesis Reconsidered," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(4), pages 435-48, November.
    7. Serletis, Apostolos & King, Martin, 1997. "Common Stochastic Trends and Convergence of European Union Stock Markets," The Manchester School of Economic & Social Studies, University of Manchester, vol. 65(1), pages 44-57, January.
    8. Lee, Junsoo & Strazicich, Mark C, 2001. " Break Point Estimation and Spurious Rejections with Endogenous Unit Root Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(5), pages 535-58, December.
    9. Angelos Kanas, . "Linkages between the US and European Equity Markets: Further Evidence from cointegration Tests," Working Papers 9804, University of Crete, Department of Economics.
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    Cited by:
    1. Cunado, J. & Gil-Alana, L.A. & Gracia, Fernando Perez de, 2010. "Mean reversion in stock market prices: New evidence based on bull and bear markets," Research in International Business and Finance, Elsevier, vol. 24(2), pages 113-122, June.

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