Simulating Stock Returns Under Switching Regimes - A New Test of Market Efficiency

David Meenagh, A. Patrick L. Minford and David A. Peel

No 5614, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: A model of profits switches between four regimes with fixed probabilities; the rationally expected profits stream implies the stock market value. This efficient market model is not rejected by UK post-war time-series behaviour of either profits or the FTSE index.

Keywords: efficient markets; rational expectations; regime switching; stock returns (search for similar items in EconPapers)
JEL-codes: C15 C5 G14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin and nep-fmk
Date: 2006-04
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Working Paper: Simulating Stock Returns under switching regimes - a new test of market efficiency (2006)
Journal Article: Simulating stock returns under switching regimes - A new test of market efficiency (2007)
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