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Testing for the Random Walk Hypothesis and Structural Breaks in International Stock Prices

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Author Info
Chancharat,Surachai (University of Wollongong)
Valadkhani, Abbas () (University of Wollongong)
Abstract

This paper examines whether stock prices for 16 countries are trend stationary or follow a random walk process using the (Zivot and Andrews, 1992) and (Lumsdaine and Papell, 1997) tests and monthly data (1987:12-2005:12). With one structural break, the ZA test results provide evidence in favour of random walk hypothesis in 14 countries. However, when two endogenously-determined structural breaks are considered, this hypothesis was rejected for only five countries, suggesting a robust conclusion regarding the non-stationarity of stock prices world wide. In addition, the dates of structural break in most cases point to the Asian crisis in the period 1996-1998.

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File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow038121.pdf
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Paper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp07-15.

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Length: 14 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:uow:depec1:wp07-15

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Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
Phone: +612 4221-3663
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Web page: http://www.uow.edu.au/commerce/econ/
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Related research
Keywords: stock market; random walk; structural break;

Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ronald Balvers & Yangru Wu & Erik Gilliland, 2000. "Mean Reversion across National Stock Markets and Parametric Contrarian Investment Strategies," Journal of Finance, American Finance Association, vol. 55(2), pages 745-772, 04. [Downloadable!] (restricted)
  2. Dan Ben-David & Robin L. Lumsdaine & David H. Papell, 1998. "Unit Roots, Postwar Slowdowns and Long-Run Growth: Evidence from Two Structural Breaks," NBER Working Papers 6397, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Chaudhuri, Kausik & Wu, Yangru, 2003. "Random walk versus breaking trend in stock prices: Evidence from emerging markets," Journal of Banking & Finance, Elsevier, vol. 27(4), pages 575-592, April. [Downloadable!] (restricted)
    Other versions:
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