Threshold Random Walks in the U.S. Stock Market

Zisimos Koustas, Jean-Francois Lamarche (jfl@brocku.ca) and Apostolos Serletis

No 602, Working Papers from Brock University, Department of Economics

Abstract: This paper extends the work in Serletis and Shintani (2003) and Elder and Serletis ( 2006) by re-examining the empirical evidence for random walk type behavior in the U.S. stock market. In doing so, it tests the random walk hypothesis by employing unit-root tests that are designed to have more statistical power against nonlinear al- ternatives. The nonlinear feature of our model is re ected by three regimes, one of which is characterized by a unit root process and the random walk hypothesis while the lower and upper regimes are well captured by a stationary autoregressive process with mean reversion and predictability.

Keywords: Asymmetric time series; Threshold adjustment; Nonlinear autoregression Autoregression (search for similar items in EconPapers)
JEL-codes: C32 G12 G14 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2006-05, Revised 2006-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Chaos, Solitons & Fractals, 2008, vol. 37, pages 43-48

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https://brocku.ca/repec/pdf/0602.pdf May 2006 (application/pdf)

Related works:
Journal Article: Threshold random walks in the US stock market (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:brk:wpaper:0602

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