IDEAS home Printed from https://ideas.repec.org/a/taf/apeclt/v5y1998i1p19-23.html
   My bibliography  Save this article

A note on ERM membership and the efficiency of the London Stock Exchange

Author

Listed:
  • David Chappel
  • Joanne Padmore
  • Julia Pidgeon

Abstract

The behaviour of the FTSE 30 share index is examined over a period from November 1988 to May 1994. We examine whether the index exhibits different time series behaviour during the time that Sterling belonged to the ERM to that observed in the pre- and post-ERM period. We show that the random walk behaviour, which would be expected under the Efficient Markets Hypothesis (EMH), occurs during the period when Sterling belonged to the ERM but for pre- and post-ERM membership period the index does not appear to follow a random walk.

Suggested Citation

  • David Chappel & Joanne Padmore & Julia Pidgeon, 1998. "A note on ERM membership and the efficiency of the London Stock Exchange," Applied Economics Letters, Taylor & Francis Journals, vol. 5(1), pages 19-23.
    • Handle: RePEc:taf:apeclt:v:5:y:1998:i:1:p:19-23
    DOI: 10.1080/758540120
    as

    Download full text from publisher

    File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/758540120&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/758540120?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Myung Jig Kim & Charles R. Nelson & Richard Startz, 1991. "Mean Reversion in Stock Prices? A Reappraisal of the Empirical Evidence," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(3), pages 515-528.
    2. Lo, Andrew W. & MacKinlay, A. Craig, 1989. "The size and power of the variance ratio test in finite samples : A Monte Carlo investigation," Journal of Econometrics, Elsevier, vol. 40(2), pages 203-238, February.
    3. Eckbo, B. Espen & Liu, Jian, 1993. "Temporary Components of Stock Prices: New Univariate Results," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(2), pages 161-176, June.
    4. Frennberg, Per & Hansson, Bjorn, 1993. "Testing the random walk hypothesis on Swedish stock prices: 1919-1990," Journal of Banking & Finance, Elsevier, vol. 17(1), pages 175-191, February.
    5. Hsieh, David A, 1991. "Chaos and Nonlinear Dynamics: Application to Financial Markets," Journal of Finance, American Finance Association, vol. 46(5), pages 1839-1877, December.
    6. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    7. Lo, Andrew W, 1991. "Long-Term Memory in Stock Market Prices," Econometrica, Econometric Society, vol. 59(5), pages 1279-1313, September.
    8. Bollerslev, Tim, 1987. "A Conditionally Heteroskedastic Time Series Model for Speculative Prices and Rates of Return," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 542-547, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kian-Ping Lim & Robert Brooks, 2009. "On the validity of conventional statistical tests given evidence of nonsynchronous trading and nonlinear dynamics in returns generating process: a further note," Applied Economics Letters, Taylor & Francis Journals, vol. 16(6), pages 649-652.
    2. Ioannis A. Tampakoudis & Demetres N. Subeniotis & Ioannis G. Kroustalis, 2012. "Modelling volatility during the current financial crisis: an empirical analysis of the US and the UK stock markets," International Journal of Trade and Global Markets, Inderscience Enterprises Ltd, vol. 5(3/4), pages 171-194.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ritesh Kumar Mishra & Sanjay Sehgal & N.R. Bhanumurthy, 2011. "A search for long‐range dependence and chaotic structure in Indian stock market," Review of Financial Economics, John Wiley & Sons, vol. 20(2), pages 96-104, May.
    2. Charilaos Mertzanis, 2013. "Risk Management Challenges after the Financial Crisis," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 42(3), pages 285-320, November.
    3. Liam A. Gallagher & Mark P. Taylor, 2002. "Permanent and Temporary Components of Stock Prices: Evidence from Assessing Macroeconomic Shocks," Southern Economic Journal, John Wiley & Sons, vol. 69(2), pages 345-362, October.
    4. Cajueiro, Daniel O. & Tabak, Benjamin M., 2006. "Testing for predictability in equity returns for European transition markets," Economic Systems, Elsevier, vol. 30(1), pages 56-78, March.
    5. Bwo-Nung Huang & Chin Yang, 1995. "The fractal structure in multinational stock returns," Applied Economics Letters, Taylor & Francis Journals, vol. 2(3), pages 67-71.
    6. Cornelis A. Los, 2004. "Nonparametric Efficiency Testing of Asian Stock Markets Using Weekly Data," Finance 0409033, University Library of Munich, Germany.
    7. Zhong, Meirui & Zhang, Rui & Ren, Xiaohang, 2023. "The time-varying effects of liquidity and market efficiency of the European Union carbon market: Evidence from the TVP-SVAR-SV approach," Energy Economics, Elsevier, vol. 123(C).
    8. Junsoo Lee & Jen-Chi Cheng & Chyongchiou Lin & Cliff Huang, 1998. "The market efficiency hypothesis on stock prices: international evidence in the 1920s," Applied Financial Economics, Taylor & Francis Journals, vol. 8(1), pages 61-65.
    9. Kim, Jae H. & Shamsuddin, Abul, 2008. "Are Asian stock markets efficient? Evidence from new multiple variance ratio tests," Journal of Empirical Finance, Elsevier, vol. 15(3), pages 518-532, June.
    10. Onali, Enrico & Goddard, John, 2009. "Unifractality and multifractality in the Italian stock market," International Review of Financial Analysis, Elsevier, vol. 18(4), pages 154-163, September.
    11. Tim Bollerslev & Robert J. Hodrick, 1992. "Financial Market Efficiency Tests," NBER Working Papers 4108, National Bureau of Economic Research, Inc.
    12. Sung Ik Kim, 2022. "ARMA–GARCH model with fractional generalized hyperbolic innovations," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-25, December.
    13. Liam Gallagher, 1999. "A multi-country analysis of the temporary and permanent components of stock prices," Applied Financial Economics, Taylor & Francis Journals, vol. 9(2), pages 129-142.
    14. Charles, Amélie & Darné, Olivier, 2009. "The random walk hypothesis for Chinese stock markets: Evidence from variance ratio tests," Economic Systems, Elsevier, vol. 33(2), pages 117-126, June.
    15. Jorge Belaire-Franch & Kwaku Opong, 2005. "A Variance Ratio Test of the Behaviour of Some FTSE Equity Indices Using Ranks and Signs," Review of Quantitative Finance and Accounting, Springer, vol. 24(1), pages 93-107, January.
    16. Ezzat, Hassan, 2013. "Long Memory Processes and Structural Breaks in Stock Returns and Volatility: Evidence from the Egyptian Exchange," MPRA Paper 51465, University Library of Munich, Germany.
    17. Amélie Charles & Olivier Darné, 2009. "Variance‐Ratio Tests Of Random Walk: An Overview," Journal of Economic Surveys, Wiley Blackwell, vol. 23(3), pages 503-527, July.
    18. Cheung, Yin-Wong & Lai, Kon S., 1995. "A search for long memory in international stock market returns," Journal of International Money and Finance, Elsevier, vol. 14(4), pages 597-615, August.
    19. Montagnoli, Alberto & de Vries, Frans P., 2010. "Carbon trading thickness and market efficiency," Energy Economics, Elsevier, vol. 32(6), pages 1331-1336, November.
    20. Benjamin Miranda Tabak, 2003. "The random walk hypothesis and the behaviour of foreign capital portfolio flows: the Brazilian stock market case," Applied Financial Economics, Taylor & Francis Journals, vol. 13(5), pages 369-378.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apeclt:v:5:y:1998:i:1:p:19-23. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEL20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.