Random Walk Tests for the Lisbon Stock Market
AbstractThis paper reports the results of tests on the weak-form market efficiency applied to the PSI-20 index prices of the Lisbon Stock Market from January 1993 to December 2006. As an emerging stock market, it is unlikely that it is fully information-efficient, but we show that the level of weak-form efficiency has increased in recent years. We use a serial correlation test, a runs test, an augmented Dickey-Fuller test and the multiple variance ratio test proposed by Lo and MacKinlay (1988) for the hypothesis that the stock market index follows a random walk. Non-trading or infrequent trading is not an issue because the PSI-20 only includes the 20 most traded shares. The tests are performed using daily, weekly and monthly returns for the whole period and for five sub-periods which reflect different trends in the market. We find mixed evidence, but on the whole, our results show that the Portuguese stock market index has been approaching a random walk behavior since year 2000, with a decrease in the serial dependence of returns.
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Bibliographic InfoPaper provided by Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon. in its series Working Papers with number 2007/14.
Date of creation: 2007
Date of revision:
Contact details of provider:
Postal: Department of Economics, School of Economics and Management (ISEG), Technical University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: https://aquila.iseg.utl.pt/aquila/departamentos/EC
Other versions of this item:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-05-26 (All new papers)
- NEP-CFN-2007-05-26 (Corporate Finance)
- NEP-FMK-2007-05-26 (Financial Markets)
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