Tests for weak form market efficiency in stock prices: Monte Carlo evidence
Efficiency in financial markets is tested by applying variance ratio (VR)tests, but unit root tests are also used by many, sometimes in addition to the VR tests. There is a lack of clarity in the literature about the implication of these test results when they seem to disagree. We distinguish between two different types of predictability, called "structural predictability" and "error predictability". Standard unit root tests pick up structural predictability. VR tests pick up both structural and error predictability.
|Date of creation:||2011|
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- Andrew W. Lo & A. Craig MacKinlay, 1987.
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NBER Working Papers
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- Vasudeva Murthy & Kenneth Washer & John Wingender, 2011. "Are stock prices in the US nonstationary? Evidence from contemporary unit root tests," Applied Financial Economics, Taylor & Francis Journals, vol. 21(22), pages 1703-1709.
- Zeynel Abidin Ozdemir, 2008. "Efficient market hypothesis: evidence from a small open-economy," Applied Economics, Taylor & Francis Journals, vol. 40(5), pages 633-641.
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