Variance Ratio Test of Random Walk Hypothesis and a Calendar Spread Strategy for the WTI Oil Futures Market

2021 ◽  
Author(s):  
Yutong Yang
Keyword(s):  
Random Walk ◽  
Futures Market ◽  
Ratio Test ◽  
Variance Ratio ◽  
Oil Futures ◽  
Random Walk Hypothesis ◽  
Variance Ratio Test

Variance Ratio Test of Random Walk in Indian Stock Market

2015 ◽  
Vol 2 (2) ◽  
pp. 89-107
Author(s):  
Saloni Gupta ◽  
Neha Bothra
Keyword(s):  
Random Walk ◽  
Stock Market ◽  
Stock Returns ◽  
Ratio Test ◽  
Variance Ratio ◽  
Random Walk Hypothesis ◽  
Variance Ratio Test ◽  
Indian Stock Market ◽  
High Degree ◽  
The Relationship

We conduct tests of the null hypothesis of a random walk at the aggregate level of market indices and disaggregate level of individual shares to the Indian stock market over various data periods and a comparison of two sub-periods namely the pre liberalization and the post liberalization period. For this, we use the Lo-MacKinlay (1988) variance ratio test. Although the oldest test i.e. the serial correlation coefficient test is also applied to the same data to establish the relationship between the two tests but its results are not elaborated in this paper. The strength of this paper lies in the voluminous data base and a powerful testing tool that it makes use of. It is observed that the market is highly inefficient at daily returns level, thus imbibing high degree of predictability in stock returns, and even the weekly returns show the existence of trend. Monthly returns, however, support the random walk hypothesis across all periods. Thus it is concluded that further refinement of reform measures is required.

scholarly journals International Real Estate Review

2007 ◽  
Vol 10 (2) ◽  
pp. 94-112
Author(s):  
Jorge Belaire-Franch ◽  
◽  
Stanley McGreal ◽  
Kwaku K. Opong ◽  
James R. Webb ◽  
...  
Keyword(s):  
United Kingdom ◽  
Random Walk ◽  
Real Estate ◽  
Efficient Market Hypothesis ◽  
Ratio Test ◽  
Variance Ratio ◽  
Positive Dependence ◽  
Random Walk Hypothesis ◽  
Variance Ratio Test ◽  
Real Estate Securities

This study utilizes tests based on ranks and signs suggested by Wright (2000), in addition to the traditional variance-ratio test, to examine the behavior of United Kingdom real estate and construction security indices. The results suggest a positive dependence in the index return series and provide a strong rejection of the random walk hypothesis for the two U.K. index series examined in this study. Thus, the efficient market hypothesis (EMH) is not confirmed for these real estate securities indices in the U.K.

scholarly journals Variance Ratio Tests Of Random Walk Hypothesis Of The Euro Exchange Rate

2011 ◽  
Vol 7 (12) ◽  
Author(s):  
Jeng-Hong Chen
Keyword(s):  
Exchange Rate ◽  
Random Walk ◽  
Weak Form ◽  
Ratio Test ◽  
Variance Ratio ◽  
Dollar Exchange Rate ◽  
Random Walk Hypothesis ◽  
Variance Ratio Test ◽  
Non Parametric

The introduction of the Euro has drawn interested parties attention on the Euro/U.S. Dollar exchange rate market. In this research, three variance ratio tests: Lo-MacKinlays (1988) conventional variance ratio test, Chow-Dennings (1993) simple multiple variance ratio test, and Wrights (2000) non-parametric ranks and signs based variance ratio tests are adopted to test the random walk hypothesis (RWH) of the Euro/U.S. Dollar exchange rate market using the data from January 1999 to July 2008. All of three variance ratio tests results show that the RWH cannot be rejected. Therefore, the Euro/U.S. Dollar exchange rate market is regarded as weak-form efficient.

scholarly journals An Empirical Investigation of the Random Walk Hypothesis in the Nigerian Stock Market

2021 ◽  
Vol 4 (1) ◽  
pp. 62-77
Author(s):  
DA Kuhe ◽  
J Akor
Keyword(s):  
Random Walk ◽  
Stock Market ◽  
Stock Returns ◽  
Unit Root ◽  
Stock Prices ◽  
Null Hypothesis ◽  
Serial Correlation ◽  
Ratio Test ◽  
Variance Ratio ◽  
Random Walk Hypothesis

The Random Walk Hypothesis (RWH) states that stock prices move randomly in the stock market without following any regular or particular pattern and as such historical information contained in the past prices of stocks cannot be used to predict current or future stock prices. Hence, stock prices are unpredictable and that investors cannot usurp any available information in the market to manipulate the market and make abnormal profits. This study empirically examines the random walk hypothesis in the Nigerian stock market using the daily quotations of the Nigerian stock exchange from 2nd January, 1998 to 31st December, 2019. The study employs Augmented Dickey-Fuller unit root test, the random walk model, Ljung-Box Q-statistic test for serial dependence, runs test of randomness, and the robust variance ratio test as methods of analyses. The result of the study rejected the null hypotheses of a unit root and random walk in the stock returns. The null hypothesis of no serial correlation in the residuals of stock returns was also rejected indicating the presence of serial correlation/autocorrelation in the residual series. The result of the runs test rejected the null hypothesis of randomness in the Nigerian stock returns. The results of the variance ratio test under homoskedasticity and heteroskedasticity assumptions both strongly rejected the null hypothesis of a random walk for both joint tests and test of individual periods. Based on the results of the four tests applied in this study, it is concluded that the Nigerian daily stock returns under the period of investigation do not follow a random walk and hence the null hypothesis of a random walk is rejected. The results of the study further revealed that the Nigerian stock market is weak-form inefficient indicating that prices in the Nigerian stock market are predictable, dependable, consistently mispriced, inflated, liable to arbitraging and left unprotected to speculations and market manipulations. The study provided some policy recommendations

scholarly journals Time Series Properties of four Latin American Equity Markets: Argentina, Brazil, Chile and Mexico

2020 ◽  
Vol 1 (2) ◽  
pp. 1
Author(s):  
Jorge L. Urrutia
Keyword(s):  
Random Walk ◽  
Latin American ◽  
Abnormal Returns ◽  
Equity Markets ◽  
The United States ◽  
Ratio Test ◽  
Investment Strategies ◽  
Variance Ratio ◽  
Random Walk Hypothesis ◽  
Fama And French

Variance ratio tests indicate that the equity markets of Argentina, Brazil and Mexico follow random walks, but not those of Chile. The low correlations among the four markets suggest that investments in these countries can contribute to reduce portfolio risk. The research on the random walk hypothesis has been heavily concentrated on the large equity markets of the United States, Canada, Japan and Europe (summers 1986; Fama and French 1986a, 1986b; Lo and MacKinlay 1988, and Poterba and Summers 1988). Even though some studies have been conducted for stock markets of developing countries (Errunza 1983 and Errunza and Losq 1985), little research has been done in Latin American capital markets (Errunza and Losq 1987). This paper employs the variance-ratio test to investigate the random walk hypothesis for the following four Latin American equity markets: Argentina, Brazil, Chile and Mexico. Two versions of the variance-ratio tests are implemented : first, the variance-ratio under the maintained hypothesis of homocedasticity and, second, the heteroscedasticity-robust variance-ratio. The empirical results reported in the paper indicate that the random walk hypothesis is rejected for Chile but it is generally confirmed for Argentina, Brazil and Mexico. Therefore, American investors might not be able to develop investment strategies that can be generate abnormal returns in these three countries. However, the low correlation among these markets suggests that American investors can reduce the risk of their portfolios by diversifying in international stocks of these countries.

scholarly journals Testing the Predicting Ability of Technical Analysis Classical Patterns in the Egyptian Stock Market

2017 ◽  
Vol 6 (3) ◽  
pp. 94 ◽  
Author(s):  
Osama El-Ansary ◽  
Dina Mohssen
Keyword(s):  
Random Walk ◽  
Stock Market ◽  
Emerging Market ◽  
Technical Analysis ◽  
Expected Returns ◽  
Ratio Test ◽  
Variance Ratio ◽  
Empirical Results ◽  
Variance Ratio Test ◽  
Future Return

As an emerging market, Egyptian stock market is characterized by inefficiency which is confirmed empirically in this research. This provoked us to test the ability of technical analysis classical patterns in predicting the future returns through calculating the expected price target consequently the expected future return and compare it with the actual return.Statistical techniques and models including Box Pierce (Ljung-Box), Variance ratio test, Runs test, and t-test bootstrapping technique have been applied to test the research proposed hypotheses. The empirical results revealed that the Egyptian stock market is inefficient as returns don’t follow random walk and are dependent, it is found also that the actual returns have significantly exceeded the expected returns of the detected patterns indicating that classical patterns can perfectly predict the direction of the price movements rather than the exact price targets.

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