Advanced Search
MyIDEAS: Login to save this paper or follow this series

Simulating Stock Returns under switching regimes - a new test of market efficiency

Contents:

Author Info

  • Meenagh, David

    ()
    (Cardiff Business School)

  • Minford, Patrick

    ()
    (Cardiff Business School)

  • 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.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://patrickminford.net/wp/E2006_13.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2006/13.

as in new window
Length: 9 pages
Date of creation: Feb 2006
Date of revision:
Publication status: Published in Economics Letters , 94 (2007), pp. 235-239
Handle: RePEc:cdf:wpaper:2006/13

Contact details of provider:
Postal: Aberconway Building, Colum Drive, CARDIFF, CF10 3EU
Phone: +44 (0) 29 20874417
Fax: +44 (0) 29 20874419
Web page: http://business.cardiff.ac.uk/research/academic-sections/economics/working-papers
More information through EDIRC

Related research

Keywords: regime switching; stock returns; efficient markets; rational expectations;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Philippe Jorion & William N. Goetzmann, 1998. "Re-Emerging Markets," Yale School of Management Working Papers, Yale School of Management ysm111, Yale School of Management.
  2. Massimo Guidolin & Allan Timmerman, 2005. "Optimal portfolio choice under regime switching, skew and kurtosis preferences," Working Papers, Federal Reserve Bank of St. Louis 2005-006, Federal Reserve Bank of St. Louis.
  3. Stephen G. Cecchetti & Pok-sang Lam & Nelson C. Mark, 1988. "Mean Reversion in Equilibrium Asset Prices," NBER Working Papers 2762, National Bureau of Economic Research, Inc.
  4. Sullivan, Ryan & Timmermann, Allan & White, Halbert, 2001. "Dangers of data mining: The case of calendar effects in stock returns," Journal of Econometrics, Elsevier, Elsevier, vol. 105(1), pages 249-286, November.
  5. S. Rebelo., 2010. "Real Business Cycle Models: Past, Present, and Future," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 10.
  6. Andrew Ang & Geert Bekaert, 2002. "International Asset Allocation With Regime Shifts," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 15(4), pages 1137-1187.
  7. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, Elsevier, vol. 15(2), pages 145-161, March.
  8. Mehra, Rajnish & Prescott, Edward C., 1988. "The equity risk premium: A solution?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(1), pages 133-136, July.
  9. Massimo Guidolin & Allan Timmermann, 2005. "Economic Implications of Bull and Bear Regimes in UK Stock and Bond Returns," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(500), pages 111-143, 01.
  10. Rydén, Tobias & Teräsvirta, Timo & Åsbrink, Stefan, 1996. "Stylized Facts of Daily Return Series and the Hidden Markov Model," Working Paper Series in Economics and Finance 117, Stockholm School of Economics.
  11. Timmermann, Allan, 2000. "Moments of Markov switching models," Journal of Econometrics, Elsevier, Elsevier, vol. 96(1), pages 75-111, May.
  12. Massimo Guidolin & Allan Timmerman, 2006. "Asset allocation under multivariate regime switching," Working Papers, Federal Reserve Bank of St. Louis 2005-002, Federal Reserve Bank of St. Louis.
  13. Christopher M. Turner & Richard Startz & Charles R. Nelson, 1989. "A Markov Model of Heteroskedasticity, Risk, and Learning in the Stock Market," NBER Working Papers 2818, National Bureau of Economic Research, Inc.
  14. Massimo Guidolin, University of Virginia & Allan Timmermann, 2004. "Strategic Asset Allocation and Consumption Decisions under Multivariate Regime Switching," Econometric Society 2004 Australasian Meetings, Econometric Society 349, Econometric Society.
  15. Philippe Jorion & William N. Goetzmann, 1999. "Global Stock Markets in the Twentieth Century," Journal of Finance, American Finance Association, American Finance Association, vol. 54(3), pages 953-980, 06.
  16. Tom Arnold & Philip Hersch & J. Harold Mulherin & Jeffry Netter, 1999. "Merging Markets," Journal of Finance, American Finance Association, American Finance Association, vol. 54(3), pages 1083-1107, 06.
  17. Rietz, Thomas A., 1988. "The equity risk premium a solution," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(1), pages 117-131, July.
  18. Hamilton, James D & Gang, Lin, 1996. "Stock Market Volatility and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 11(5), pages 573-93, Sept.-Oct.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Stock markets, volatility and predictability
    by chris dillow in Stumbling and Mumbling on 2010-01-03 14:12:44
  2. Progress & data in economics
    by chris dillow in Stumbling and Mumbling on 2009-10-19 13:55:25
  3. Animal Spirits: A review
    by chris dillow in Stumbling and Mumbling on 2009-02-26 13:27:46
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. ap Gwilym, Rhys, 2010. "Can behavioral finance models account for historical asset prices?," Economics Letters, Elsevier, Elsevier, vol. 108(2), pages 187-189, August.
  2. Hatcher, Michael C. & Minford, Patrick, 2013. "Stabilization policy, rational expectations and price-level versus inflation targeting: a survey," Cardiff Economics Working Papers E2013/14, Cardiff University, Cardiff Business School, Economics Section.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cdf:wpaper:2006/13. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bruce Webb).

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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