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Random Walk and Multiple Structural Breaks In Thai Stock Market

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  • Chancharat, Surachai
  • Kamalian, Amin Reza
  • Valadkhani, Abbas

Abstract

The Zivot and Andrews (1992) one-break and Lumsdaine and Papell (1997) two-break unit root tests are used to investigate the random walk hypothesis in Thai stock prices for the period December 1987 to December 2005. The results provide strong evidence that the Thai stock prices are characterized by a random walk, supporting this view that it is highly unlikely to make windfall profits in the Thai stock market using past price movements. Moreover, the dates of the endogenously determined structural break interestingly coincided with the Asian crisis and world recessions.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 50395.

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Date of creation: 2009
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Publication status: Published in Empirical Economics Letters 5.8(2009): pp. 501-506
Handle: RePEc:pra:mprapa:50395

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Keywords: Stock Market Management; Random Walk; Structural Break; Thailand.;

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  1. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
  2. Ben-David, D. & Lumsdaine, L.R. & Papell, D.H., 1996. "Unit Roots Postwar Slowdowns and Long-Run Growth: Evidence from Two Structural Breaks," Papers 33-96, Tel Aviv.
  3. Eric Zivot & Donald W.K. Andrews, 1990. "Further Evidence on the Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Cowles Foundation Discussion Papers 944, Cowles Foundation for Research in Economics, Yale University.
  4. Paresh Kumar Narayan & Russell Smyth, 2006. "Random walk versus multiple trend breaks in stock prices: evidence from 15 European markets," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 2(1), pages 1-7, January.
  5. Paresh Kumar Narayan & Russell Smyth, 2005. "Are OECD stock prices characterized by a random walk? Evidence from sequential trend break and panel data models," Applied Financial Economics, Taylor & Francis Journals, vol. 15(8), pages 547-556.
  6. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
  7. Robin L. Lumsdaine & David H. Papell, 1997. "Multiple Trend Breaks And The Unit-Root Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 212-218, May.
  8. Chaudhuri, Kausik & Wu, Yangru, 2003. "Random walk versus breaking trend in stock prices: Evidence from emerging markets," Journal of Banking & Finance, Elsevier, vol. 27(4), pages 575-592, April.
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