A study on the presence of random walk in the Philippine stock market from the years 2000-2005

• Main Authors: Chua, Kenneth U., Ngo, Scott Chester K., Timbalopez, Judie Ann D.
• Format: text
• Language: English
• Published: Animo Repository 2006
• Subjects: Stock exchanges > Philippines; Stocks > Philippines; Investments > Philippines; Random walks (Mathematics); Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/9021
• Institution: De La Salle University

The study is about determining the existence or nonexistence of Random Walk in the Philippine Stock Market. The data will be used is the Philippine Stock Composite Index (PSEi). It will be subjected to the Dickey-Fuller statistic test and the Hurst Exponent of the data will be determined. The Dickey-Fuller statistic test is used to test the unit root in the time series data, it tests whether a unit root is present in an autoregressive model. The presence of the unit root determines if there is random walk or not, with its presence indicating the series does not follow a random walk. The Hurst Exponent on the other hand, needs to do a Rescaled Range Analysis which is used to determine long-memory effects and fractional Brownian motion. If the result of the Hurst exponent is independent then the hypothesis stating that there is a random walk can be validated. The proponents used the Dickey Fuller to validate the presence of random walk in the Philippine Stock Exchange while the Hurst exponent was used to determine the degree of randomness present in the data. By the results it can be seen that there is a pattern in the behavior of the PSEi since it showed a short memory. However, random behavior can still be seen in the degree of changes in the values of the PSEi and the uncertainty when that change will happen in the future.