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The Taiwan stock market does follow a random walk

Author

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  • Dat Bue Lock

    () (Feng Chia University)

Abstract

Applying the Lo and MacKinlay variance ratio test on the weekly returns from the Taiwan stock market from 1990 to mid 2006, I obtained results strongly indicative of the fact that not only does the Taiwan composite stock index move in a random walk fashion, returns for the individual stocks do so as we. Previous authors employing the same methodology obtained opposite results, namely, that the movements of the Taiwan stock composite index do not follow a random walk.

Suggested Citation

  • Dat Bue Lock, 2007. "The Taiwan stock market does follow a random walk," Economics Bulletin, AccessEcon, vol. 7(3), pages 1-8.
  • Handle: RePEc:ebl:ecbull:eb-07g00001
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    References listed on IDEAS

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    1. Andrew W. Lo, A. Craig MacKinlay, 1988. "Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 41-66.
    2. Wright, Jonathan H, 2000. "Alternative Variance-Ratio Tests Using Ranks and Signs," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(1), pages 1-9, January.
    3. Frennberg, Per & Hansson, Bjorn, 1993. "Testing the random walk hypothesis on Swedish stock prices: 1919-1990," Journal of Banking & Finance, Elsevier, vol. 17(1), pages 175-191, February.
    4. Urrutia, Jorge L, 1995. "Tests of Random Walk and Market Efficiency for Latin American Emerging Equity Markets," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 18(3), pages 299-309, Fall.
    5. Shawin Lee & Kuo-Ping Chang, 1995. "Mean-Variance-Instability Portfolio Analysis: A Case of Taiwan's Stock Market," Management Science, INFORMS, vol. 41(7), pages 1151-1157, July.
    6. Poterba, James M. & Summers, Lawrence H., 1988. "Mean reversion in stock prices : Evidence and Implications," Journal of Financial Economics, Elsevier, vol. 22(1), pages 27-59, October.
    7. Kuo-Ping Chang & Kuo-Shiuan Ting, 2000. "A variance ratio test of the random walk hypothesis for Taiwan's stock market," Applied Financial Economics, Taylor & Francis Journals, vol. 10(5), pages 525-532.
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    Cited by:

    1. Mobarek, Asma & Fiorante, Angelo, 2014. "The prospects of BRIC countries: Testing weak-form market efficiency," Research in International Business and Finance, Elsevier, vol. 30(C), pages 217-232.
    2. Andreea-Cristina PETRICĂ & Stelian STANCU & Alexandru TINDECHE, 2016. "Limitation of ARIMA models in financial and monetary economics," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(609), W), pages 19-42, Winter.
    3. Aumeboonsuke, Vesarach & Dryver, Arthur L., 2014. "The importance of using a test of weak-form market efficiency that does not require investigating the data first," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 350-357.
    4. Andreea-Cristina PETRICĂ & Stelian STANCU & Alexandru TINDECHE, 2016. "Limitation of ARIMA models in financial and monetary economics," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(609), W), pages 19-42, Winter.
    5. Khan, Walayet & Vieito, João Paulo, 2012. "Stock exchange mergers and weak form of market efficiency: The case of Euronext Lisbon," International Review of Economics & Finance, Elsevier, vol. 22(1), pages 173-189.

    More about this item

    Keywords

    random walk;

    JEL classification:

    • G0 - Financial Economics - - General

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