EconPapers    
Economics at your fingertips  
 

On the Efficient Market Hypothesis of Stock Market Indexes: The Role of Non-synchronous Trading and Portfolio Effects

Roberto Ortiz, Mauricio Contreras and Marcelo Villena

Papers from arXiv.org

Abstract: In this article, the long-term behavior of the stock market index of the New York Stock Exchange is studied, for the period 1950 to 2013. Specifically, the CRSP Value-Weighted and CRSP Equal-Weighted index are analyzed in terms of market efficiency, using the standard ratio variance test, considering over 1600 one week rolling windows. For the equally weighted index, the null hypothesis of random walk is rejected in the whole period, while for the weighted market value index, the null hypothesis start to be accepted from the 1990s. In order to explain this difference, we raised the hypothesis that this behavior can be explained by the joint action of portfolios and non-synchronous trading effects. To check the feasibility of the above assumption, we performed a simulation of both effects, on two- and six-asset portfolios. The results showed that it is possible to explain the empirical difference between the two index, almost entirely by the joint effects of portfolio and non-synchronous trading.

Date: 2015-10
New Economics Papers: this item is included in nep-cmp
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://arxiv.org/pdf/1510.03926 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1510.03926

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().

 
Page updated 2020-04-20
Handle: RePEc:arx:papers:1510.03926