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Simulating Stock Returns under switching regimes - a new test of market efficiency

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Abstract

A model of profits switches between four regimes with fixed probabilities,the rationally expected profits stream implies the stock market value. This efficient market model is not rejected by UK post-war time-series behaviour of either profits or the FTSE index.

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  • Meenagh, David & Minford, Patrick & Peel, David, 2006. "Simulating Stock Returns under switching regimes - a new test of market efficiency," Cardiff Economics Working Papers E2006/13, Cardiff University, Cardiff Business School, Economics Section.
    • Handle: RePEc:cdf:wpaper:2006/13
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    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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