Do Spanish Stock Market Prices Follow a Random Walk?

Javier De Peña () and Luis Gil-Alana
Authors registered in the RePEc Author Service: Fernando Pérez de Gracia () and Javier Gómez Biscarri

No 01/02, Faculty Working Papers from School of Economics and Business Administration, University of Navarra

Abstract: In this article we test the random walk hypothesis in the Spanish daily stock market prices by means of using fractionally integrated techniques. We use a version of the tests of Robinson (1994) that permit us to test I(d) statistical models. The results show that though fractional degrees of integration are plausible in some cases, the confidence intervals are generally narrow, including the unit root in all cases. Therefore, there is very little evidence of fractional integration, despite the length of the series, implying that the standard practice of taking first differences when modelling stock prices is adequate. In addition, the tests cannot reject that the underlying I(0) disturbances are white noise, supporting thus the (weakly) efficient market hypothesis in the Spanish stock market.

Keywords: Stock market; Unit roots; Long memory; Market efficiency (search for similar items in EconPapers)
JEL-codes: C22 G14 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2002-04-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published, European Review of Economics and Finance, 2004, vol. 3(1):pp. 3-13

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