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Stock Prices And Excessive Volatility: Some Evidence For The Ft Ordinary Share Index

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  • Ronald MacDonald

Abstract

In this paper the efficiency of the UK stock market is examined using the FT Ordinary share price and dividend indices for the period January 1947 to June 1987. In particular, we examine the validity of the present value model of stock prices using a vector error correction model (VECM). Amongst the findings reported in the paper are that stock prices and dividends are cointegrated and the cross‐equation restrictions imposed on the VECM are strongly rejected.

Suggested Citation

  • Ronald MacDonald, 1994. "Stock Prices And Excessive Volatility: Some Evidence For The Ft Ordinary Share Index," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 21(1), pages 65-76, January.
    • Handle: RePEc:bla:jbfnac:v:21:y:1994:i:1:p:65-76
    DOI: 10.1111/j.1468-5957.1994.tb00305.x
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