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Does the financial crisis influence the random walk behaviour of international stock markets?

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  • Benjamin Auer
  • Martin Schuster

Abstract

In this note, we use several modern multiple variance ratio tests (VR tests) to investigate whether the financial crisis has an impact on the random walk behaviour of international stock markets. Grouping a pre-crisis- and a crisis-panel in developed, emerging and frontier markets, respectively, and using daily returns of selected Morgan Stanley Capital International (MSCI) International Equity Indices we find that markets classified as developed or emerging mostly follow a random walk whereas we find the opposite for frontier markets. Frontier markets show a higher proportion of countries that experience changes in the random walk behaviour and changes from random walk to nonrandom walk are more frequent. We also find that the choice of multiple VR test does not matter for this kind of analysis.

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  • Benjamin Auer & Martin Schuster, 2011. "Does the financial crisis influence the random walk behaviour of international stock markets?," Applied Economics Letters, Taylor & Francis Journals, vol. 18(4), pages 319-323.
    • Handle: RePEc:taf:apeclt:v:18:y:2011:i:4:p:319-323
    DOI: 10.1080/13504851003670676
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    Cited by:

    1. Assaf, Ata, 2016. "MENA stock market volatility persistence: Evidence before and after the financial crisis of 2008," Research in International Business and Finance, Elsevier, vol. 36(C), pages 222-240.
    2. Amira Akl Ahmed, 2014. "Evolving and relative efficiency of MENA stock markets: evidence from rolling joint variance ratio tests," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 91-126, May.
    3. Benjamin R. Auer & Tobias Hiller, 2015. "On the evaluation of soccer players: a comparison of a new game-theoretical approach to classic performance measures," Applied Economics Letters, Taylor & Francis Journals, vol. 22(14), pages 1100-1107, September.

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