Scandinavian Working Papers in Economics
Working Papers,
Copenhagen Business School, Department of Economics
No 07-2001: THE RANDOM WALK OF STOCK PRICES: IMPLICATIONS OF RECENT NONPARA-METRIC TESTS
Christian M. Dahl and Steen Nielsen
Additional contact information
Christian M. Dahl: Purdue University, Postal: Economics Department, Purdue University,
Steen Nielsen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Abstract: This paper applies six recently developed nonparametric tests of serial independence
to monthly US stock returns. Findings of previous studies based on the BDS test are sup-ported
since most of the new tests also reject the random walk hypothesis. Furthermore,
power properties of the new tests are compared with those of the BDS test. The latter has
much power against ARCH and GARCH alternatives whereas some of the more recent
tests are superior against other alternatives. Finally, the power study of this paper shows,
contrary to common belief, that ARCH and GARCH effects do not seem to explain rejec-tion
of the random walk.
Keywords: Random walk; nonparametric tests; stock returns
JEL-codes: G12
21 pages, August 4, 2001
Full text files
7650
- Copenhagen Business School, Department of Economics
- Ordering Working Papers
- Home page for this series
Questions (including download problems) about the papers in this series should be directed to CBS Library Research Registration Team ()
Report other problems with accessing this service to Sune Karlsson ().
RePEc:hhs:cbsnow:2001_007This page generated on 2024-09-13 22:14:19.