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The Random Walk Behaviour Of Stock Prices: A Comparative Study

Author

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  • Arusha Cooray

Abstract

: This paper tests the random walk hypothesis for the stock markets of the US, Japan, Germany, the UK, Hong Kong and Australia using unit root tests and spectral analysis. The results based upon the augmented Dicky Fuller (1979) and Phillips-Perron (1988) tests and spectral analysis find that all markets exhibit a random walk. The multivariate cointegration tests based upon the Johansen Juselius (1988, 1990) methodology indicates that all six markets share a common long run stochastic trend. The vector error correction models suggest a short run relationship between the US, Germany, Australia and the rest of the markets implying that these countries can gain in the short run by diversifying their portfolios

Suggested Citation

  • Arusha Cooray, 2004. "The Random Walk Behaviour Of Stock Prices: A Comparative Study," Econometric Society 2004 Far Eastern Meetings 540, Econometric Society.
  • Handle: RePEc:ecm:feam04:540
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    Cited by:

    1. Shahram Fattahi & Omid Ranjbar, 2010. "Weak- Form Efficiency in the German Stock Market," Iranian Economic Review, Economics faculty of Tehran university, vol. 15(3), pages 77-94, fall.

    More about this item

    Keywords

    stock prices; random walk; spectral analysis;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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