Do Asian Stock Markets Follow Martingales? Evidence from Spectral Shape Tests
The martingale hypothesis is examined for 5 Asian stock markets using the spectral shape tests of Durlauf (1991). Unlike the variance ratio test used in prior studies, the spectral shape tests are consistent against all stationary alternatives to the martingale null. With daily data, both tests reje...
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sg-smu-ink.lkcsb_research-31862010-09-23T12:30:04Z Do Asian Stock Markets Follow Martingales? Evidence from Spectral Shape Tests Koh, Seng Kee, Benedict Fong, W. M. The martingale hypothesis is examined for 5 Asian stock markets using the spectral shape tests of Durlauf (1991). Unlike the variance ratio test used in prior studies, the spectral shape tests are consistent against all stationary alternatives to the martingale null. With daily data, both tests reject the null for all 5 markets: Thailand, Hong Kong, Korea, Malaysia, and Taiwan. With weekly data, the null is rejected for Thailand and Malaysia. As expected, the spectral shape tests yield stronger rejections of the null than the variance ratio test. Departures from the martingale cannot be entirely attributed to problems caused by infrequent trading. The use of value-weighted indexes means that only the most actively traded stocks are included in the market portfolios. Plausible models of infrequent trading also suggest geometrically declining returns autocorrelations past lag one. The persistent and mainly positive autocorrelations found at distant lags may mean returns have long memory. 1994-01-01T08:00:00Z text https://ink.library.smu.edu.sg/lkcsb_research/2187 info:doi/10.1007/BF01739207 https://doi.org/10.1007/BF01739207 Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Business |
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Business Koh, Seng Kee, Benedict Fong, W. M. Do Asian Stock Markets Follow Martingales? Evidence from Spectral Shape Tests |
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The martingale hypothesis is examined for 5 Asian stock markets using the spectral shape tests of Durlauf (1991). Unlike the variance ratio test used in prior studies, the spectral shape tests are consistent against all stationary alternatives to the martingale null. With daily data, both tests reject the null for all 5 markets: Thailand, Hong Kong, Korea, Malaysia, and Taiwan. With weekly data, the null is rejected for Thailand and Malaysia. As expected, the spectral shape tests yield stronger rejections of the null than the variance ratio test. Departures from the martingale cannot be entirely attributed to problems caused by infrequent trading. The use of value-weighted indexes means that only the most actively traded stocks are included in the market portfolios. Plausible models of infrequent trading also suggest geometrically declining returns autocorrelations past lag one. The persistent and mainly positive autocorrelations found at distant lags may mean returns have long memory. |
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Koh, Seng Kee, Benedict Fong, W. M. |
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Koh, Seng Kee, Benedict Fong, W. M. |
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Koh, Seng Kee, Benedict |
title |
Do Asian Stock Markets Follow Martingales? Evidence from Spectral Shape Tests |
title_short |
Do Asian Stock Markets Follow Martingales? Evidence from Spectral Shape Tests |
title_full |
Do Asian Stock Markets Follow Martingales? Evidence from Spectral Shape Tests |
title_fullStr |
Do Asian Stock Markets Follow Martingales? Evidence from Spectral Shape Tests |
title_full_unstemmed |
Do Asian Stock Markets Follow Martingales? Evidence from Spectral Shape Tests |
title_sort |
do asian stock markets follow martingales? evidence from spectral shape tests |
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Institutional Knowledge at Singapore Management University |
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1994 |
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https://ink.library.smu.edu.sg/lkcsb_research/2187 https://doi.org/10.1007/BF01739207 |
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