Do shocks to G7 stock prices have a permanent effect?

Paresh Narayan ()

Mathematics and Computers in Simulation (MATCOM), 2008, vol. 77, issue 4, 369-373

Abstract: There is a plethora of studies that investigate evidence for the behaviour of stock prices using univariate techniques for unit roots. Whether or not stock prices are characterised by a unit root have implications for the efficient market hypothesis, which asserts that returns of a stock market are unpredictable from previous price changes. The extant literature has found mixed evidence on the integrational properties of stock prices. In this paper, for the first time, we provide evidence on the unit root hypothesis for G7 stock price indices using the Lagrangian multiplier panel unit root test that allows for structural breaks. Our main finding is that stock prices are stationary processes, inconsistent with the efficient market hypothesis.

Keywords: Stock prices; Efficient market hypothesis; Lagrangian multiplier panel unit root test (search for similar items in EconPapers)
JEL-codes: C22 G14 G15 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:matcom:v:77:y:2008:i:4:p:369-373

DOI: 10.1016/j.matcom.2007.03.003

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