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Variance Ratio Tests of the Random Walk in the BRVM

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  • Konan L¨¦on N'DRI

Abstract

The hypothesis that a stock market price index follows a random walk is tested for the regional stock market of the West African Economic and Monetary Union called the Bourse R¨¦gionale des Valeurs Mobili¨¨res (BRVM) using the Lo and MacKinlay (1988), the Chow and Denning (1993), and the Wright¡¯s (2000) rank-based variance ratio tests. The tests are applied to daily stock price index over the period January 2, 2002 to December 31, 2004, and all three tests reveals that the null hypothesis of random walk can not be rejected in the BRVM. This result is an indication that the BRVM is weak form efficiency and has various implications for investors and regulators. The first would engage their savings into productive investments opportunities and the second will limit their intervention as securities are fairly priced.

Suggested Citation

  • Konan L¨¦on N'DRI, 2015. "Variance Ratio Tests of the Random Walk in the BRVM," Applied Economics and Finance, Redfame publishing, vol. 2(2), pages 118-125, May.
    • Handle: RePEc:rfa:aefjnl:v:2:y:2015:i:2:p:118-125
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    More about this item

    Keywords

    Stock market efficiency; Random walk hypothesis; Variance ratio tests; BRVM.;
    All these keywords.

    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
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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