17 Pages Posted: 5 Jul 2006
Date Written: April 2006
A model of profits switches between four regimes with fixed probabilities; the rationally expected profits stream implies the stock market value. This efficient market model is not rejected by UK post-war time-series behaviour of either profits or the FTSE index.
Keywords: Regime switching, stock returns, efficient markets, rational expectations
JEL Classification: C15, C5, G14
Suggested Citation: Suggested Citation
Meenagh, David and Minford, Patrick and Peel, David A., Simulating Stock Returns under Switching Regimes - A New Test of Market Efficiency (April 2006). CEPR Discussion Paper No. 5614. Available at SSRN: https://ssrn.com/abstract=913344
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