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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Main Authors: Koh, Seng Kee, Benedict, Fong, W. M.
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Language:English
Published: Institutional Knowledge at Singapore Management University 1994
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Online Access:https://ink.library.smu.edu.sg/lkcsb_research/2187
https://doi.org/10.1007/BF01739207
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spelling 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
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Business
spellingShingle Business
Koh, Seng Kee, Benedict
Fong, W. M.
Do Asian Stock Markets Follow Martingales? Evidence from Spectral Shape Tests
description 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.
format text
author Koh, Seng Kee, Benedict
Fong, W. M.
author_facet Koh, Seng Kee, Benedict
Fong, W. M.
author_sort 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
publisher Institutional Knowledge at Singapore Management University
publishDate 1994
url https://ink.library.smu.edu.sg/lkcsb_research/2187
https://doi.org/10.1007/BF01739207
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