TESTING THE HYPOTHESIS OF MARTINGALE ON INTRADAY DATA: THE CASE OF BET INDEX

Alexandru Todea () and Anita Pleşoianu
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Anita Pleşoianu: “Babeş-Bolyai” University, Cluj-Napoca

Theoretical and Applied Economics, 2011, vol. 5(558)(supplement), issue 5(558)(supplement), 344-351

Abstract: The hypothesis of martingale on Romanian capital market is tested based on the intraday data of the BET index for the time period November 2, 2009 through April 30, 2010. Investigation of this hypothesis is realized through two recent test, the Automatic Variance Ratio test of Kim (2009) and the Generalized Spectral test of Escanciano and Velasco (2006). The first has the best performance in the presence of linear dependencies, while the high performance of the second is in the presence of nonlinear dependencies. The robustness of the two tests in the presence of heteroskedasticity is given by using a wild boostrap methodology. The empirical results reject the hypothesis of martingale especially due to the presence of nonlinear dependencies in the intraday data, indicating the existence of a high potential of predictability.

Keywords: informational efficiency; martingale; intraday data; wild boostrap. (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:agr:journl:v:5(558)(supplement):y:2011:i:5(558)(supplement):p:344-351

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