The Random Walk Of Stock Prices: Implications Of Recent Nonpara-Metric Tests
AbstractThis paper applies six recently developed nonparametric tests of serial independence to monthly US stock returns. Findings of previous studies based on the BDS test are sup-ported since most of the new tests also reject the random walk hypothesis. Furthermore, power properties of the new tests are compared with those of the BDS test. The latter has much power against ARCH and GARCH alternatives whereas some of the more recent tests are superior against other alternatives. Finally, the power study of this paper shows, contrary to common belief, that ARCH and GARCH effects do not seem to explain rejec-tion of the random walk.
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Bibliographic InfoPaper provided by Copenhagen Business School, Department of Economics in its series Working Papers with number 07-2001.
Length: 21 pages
Date of creation: 04 Aug 2001
Date of revision:
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Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Phone: 38 15 25 75
Fax: 38 15 34 99
Web page: http://www.cbs.dk/departments/econ/
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Random walk; nonparametric tests; stock returns;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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- repec:att:wimass:9520 is not listed on IDEAS
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- Donald Brown & Rustam Ibragimov, 2005. "Sign Tests for Dependent Observations and Bounds for Path-Dependent Options," Yale School of Management Working Papers amz2581, Yale School of Management, revised 01 Jul 2005.
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