Efficiency tests in the Iberian stock markets

José Carlos Dias, Luís Lopes (), Vitor Martins and Jose Benzinho
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José Carlos Dias: ISCA Coimbra
Vitor Martins: ISCA Coimbra
Authors registered in the RePEc Author Service: Vitor Dias Martins () and Vitor Dias Martins

Finance from University Library of Munich, Germany

Abstract: This paper investigates the efficiency of the two major stock indexes of the Iberian Peninsula, the Portuguese Stock Index (PSI-20) and the Spanish Stock Index (IBEX-35). We used daily data from January 1993 to September 2001 for the Portuguese stock index and daily data from October 1990 to September 2001 for the Spanish stock index. Serial correlations, unit root tests and variance ratio tests are used to test the efficiency of these two stock indexes. Although the complementary of these tests, we used all of them to get a higher robustness of the conclusions. We examined serial correlation coefficients for successive stock index changes to test whether they are statistically equal to zero to establish the random walk nature of stock indexes. The augmented Dickey-Fuller (ADF) test are used to test the null hypothesis that the series has a unit root and the variance ratio tests are used to examine the random walk hypothesis for the series of these two stock indexes. The results of the serial correlations, unit root tests and variance ratio tests provide ambiguous evidence for the random walk hypothesis. The empirical evidence from the unit root tests do not reject the efficient market hypothesis for the two stock indexes, while the results from the variance ratio tests and serial correlations do.

Keywords: stock indexes; market efficiency; unit roots (search for similar items in EconPapers)
JEL-codes: C22 G10 G14 G15 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2004-06-01
New Economics Papers: this item is included in nep-eec, nep-fin and nep-fmk
Note: Type of Document - pdf; pages: 16
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:0406001

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