Testing for the martingale hypothesis in Asian stock prices: evidence from a new joint variance ratio test
AbstractThis paper tests for the martingale (or random walk) hypothesis in the stock prices of a group of Asian countries. The selected countries represent well-developed markets (Hong Kong and Japan) as well as emerging markets (Korea, Taiwan and Thailand). This paper adopts a new joint variance ratio test which is a finite sample test based on the wild bootstrap method. It is different from the conventional variance ratio tests in that its sampling distribution is approximated by a resampling method, which has been found to exhibit better small sample properties than the asymptotic method. The test for the martingale hypothesis is conducted with moving-subsample windows, to control the sensitivity of the results to the particular sample periods. Overall, it is found that the stock prices of Japan, Korea, and Hong Kong are found to follow the martingale, indicating that their stock markets have been efficient.
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Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society 2004 Australasian Meetings with number 98.
Date of creation: 11 Aug 2004
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Martingale hypothesis; Stock Market Efficiency; Variance Ratio Test; Wild bootstrap;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-10-30 (All new papers)
- NEP-ETS-2004-10-30 (Econometric Time Series)
- NEP-FIN-2004-10-30 (Finance)
- NEP-RMG-2004-10-30 (Risk Management)
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