THE RANDOM WALK BEHAVIOUR OF STOCK PRICES: A COMPARATIVE STUDY

Arusha Cooray

No 540, Econometric Society 2004 Far Eastern Meetings from Econometric Society

Abstract: : This paper tests the random walk hypothesis for the stock markets of the US, Japan, Germany, the UK, Hong Kong and Australia using unit root tests and spectral analysis. The results based upon the augmented Dicky Fuller (1979) and Phillips-Perron (1988) tests and spectral analysis find that all markets exhibit a random walk. The multivariate cointegration tests based upon the Johansen Juselius (1988, 1990) methodology indicates that all six markets share a common long run stochastic trend. The vector error correction models suggest a short run relationship between the US, Germany, Australia and the rest of the markets implying that these countries can gain in the short run by diversifying their portfolios

Keywords: stock prices; random walk; spectral analysis (search for similar items in EconPapers)
JEL-codes: G15 (search for similar items in EconPapers)
Date: 2004-08-11
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ecm:feam04:540

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