Structural Breaks and Testing for the Random Walk Hypothesis in International Stock Prices

Surachai Chancharat and Abbas Valadkhani

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines whether stock prices for 16 countries are trend stationary or follow a random walk process using the (Zivot and Andrews, 1992) and (Lumsdaine and Papell, 1997) tests and monthly data (1987:12-2005:12). With one structural break, the ZA test results provide evidence in favour of random walk hypothesis in 14 countries. However, when two endogenously-determined structural breaks are considered, this hypothesis was rejected for only five countries, suggesting a robust conclusion regarding the non-stationarity of stock prices world wide. In addition, the dates of structural break in most cases point to the Asian crisis in the period 1996-1998.

Keywords: stock market; random walk; structural break (search for similar items in EconPapers)
JEL-codes: C22 G14 G15 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (4)

Published in Journal of the Korean Economy 1.8(2007): pp. 21-38

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:50394

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