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On the Stationarity of Transition Probability Matrices of Common Stocks

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  • Fielitz, Bruce D.

Abstract

Numerous empirical studies have appeared in recent years concerning the behavior of stock market prices. Cootner's book [2] presents an excellent summary of pre-1964 efforts, while Fama's paper [5] discusses some of the more recent work. While a few writers believe that certain price trends and patterns exist which enable the investor to make better predictions of the expected value of future stock price changes, the majority of these studies conclude that past price data alone cannot form the basis for the prediction of the expected value of price movements in the stock market.

Suggested Citation

  • Fielitz, Bruce D., 1975. "On the Stationarity of Transition Probability Matrices of Common Stocks," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 10(2), pages 327-339, June.
    • Handle: RePEc:cup:jfinqa:v:10:y:1975:i:02:p:327-339_01
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    1. Jean†François L'Her & Jean†Marc Suret, 1991. "The reaction of Canadian securities to revisions of earnings forecasts," Contemporary Accounting Research, John Wiley & Sons, vol. 7(2), pages 378-406, March.
    2. T. C. Mills & J. V. Jordanov, 2003. "The size effect and the random walk hypothesis: evidence from the London Stock Exchange using Markov Chains," Applied Financial Economics, Taylor & Francis Journals, vol. 13(11), pages 807-815.
    3. Tan, Baris & Yilmaz, Kamil, 2002. "Markov chain test for time dependence and homogeneity: An analytical and empirical evaluation," European Journal of Operational Research, Elsevier, vol. 137(3), pages 524-543, March.
    4. Jean†Marc Suret & Jean†François L'Her, 1990. "La réaction des titres canadiens aux changements dans les prévisions de bénéfices comptables," Contemporary Accounting Research, John Wiley & Sons, vol. 7(1), pages 347-377, September.
    5. Bhat, Harish S. & Kumar, Nitesh, 2012. "Option pricing under a normal mixture distribution derived from the Markov tree model," European Journal of Operational Research, Elsevier, vol. 223(3), pages 762-774.

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