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Simulating Stock Returns Under Switching Regimes - A New Test of Market Efficiency

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Author Info
Meenagh, David
Minford, Patrick
Peel, David

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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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5614.

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Date of creation: Apr 2006
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Handle: RePEc:cpr:ceprdp:5614

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Keywords: efficient markets rational expectations regime switching stock returns

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Find related papers by JEL classification:
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
C5 - Mathematical and Quantitative Methods - - Econometric Modeling
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies

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  5. William N. Goetzmann & Philippe Jorion, 1998. "Re-emerging Markets," Yale School of Management Working Papers ysm50, Yale School of Management. [Downloadable!]
    Other versions:
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    Other versions:
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  15. Philippe Jorion & William N. Goetzmann, 1999. "Global Stock Markets in the Twentieth Century," Journal of Finance, American Finance Association, vol. 54(3), pages 953-980, 06. [Downloadable!] (restricted)
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