Testing for the Random Walk Hypothesis and Structural Breaks in International Stock Prices
AbstractThis paper examines whether stock prices for 16 countries are trend stationary or follow a random walk process using the (Zivot and Andrews, 1992) and (Lumsdaine and Papell, 1997) tests and monthly data (1987:12-2005:12). With one structural break, the ZA test results provide evidence in favour of random walk hypothesis in 14 countries. However, when two endogenously-determined structural breaks are considered, this hypothesis was rejected for only five countries, suggesting a robust conclusion regarding the non-stationarity of stock prices world wide. In addition, the dates of structural break in most cases point to the Asian crisis in the period 1996-1998.
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Bibliographic InfoPaper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp07-15.
Length: 14 pages
Date of creation: 2007
Date of revision:
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Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
Phone: +612 4221-3659
Fax: +612 4221-3725
Web page: http://business.uow.edu.au/econ/index.html
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stock market; random walk; structural break;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
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