A New Variance Ratio Test of Random Walk in Emerging Markets: A Revisit
28 Pages Posted: 29 Aug 2006
There are 2 versions of this paper
A New Variance Ratio Test of Random Walk in Emerging Markets: A Revisit
A New Variance Ratio Test of Random Walk in Emerging Markets: A Revisit
Abstract
Using Wright's (2000) new non-parametric variance-ratio (VR) test, we revisit the empirical validity of the random walk hypothesis in eight emerging markets in the Middle East and North Africa (MENA): Bahrain, Egypt, Jordan, Kuwait, Morocco, Oman, Saudi Arabia, and Tunisia. We show that: (i) while returns from raw data do not follow a random walk, one cannot reject the random walk hypothesis, particularly when the data have not been corrected to remove any measurement bias arising from thin and infrequent trading prevalent in nascent and small stock markets; (ii) Wright's non-parametric VR is more appropriate for emerging stock markets; and (iii) our findings can explain the contradictory results in the literature regarding the relative efficiency of emerging markets in MENA.
Keywords: Emerging stock markets, Random walk hypothesis, Middle East and North Africa (MENA) stock markets
JEL Classification: F36, G14, G15
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Size and Power of the Variance Ratio Test in Finite Samples: a Monte Carlo Investigation
By Andrew W. Lo and A. Craig Mackinlay
-
On Testing the Random Walk Hypothesis: A Model-Comparison Approach
By Ali F. Darrat and Maosen Zhong
-
Testing Weak-Form Efficiency of the Russian Stock Market
By Natalia Abrosimova, Gishan Dissanaike, ...