Random Walk Tests for Latin American Equity Indexes and Individual Firms

Abstract

In this study we re‐examine the presence of random walk in stock prices in Brazil and Mexico. We employ variance ratio tests on weekly stock returns for indexes as well as individual firms. The results reveal mean aversion in Mexico at both the index level and the firm level. In contrast, the Brazil indexes show a greater tendency toward random walk; however, the results for the individual firms suggest mean reversion. The results cannot be attributed to a firm size effect. Evidence is presented in favor of a greater degree of nonsynchronous trading for Brazilian securities than for Mexican securities.

Random walk tests for the Lisbon stock market

“…The globalization markets spawned interest on the study of this issue, with many studies both on individual markets and regional markets, such as Latin America (Urrutia, 1995;Grieb and Reyes, 1999), Africa (Smith at al., 2002;Magnusson and Wydick, 2002), Asia (Huang, 1995;Groenewold and Ariff, 1998), Middle East (Abraham et al, 2002) and Europe (Worthington and Higgs, 2004), reporting unconformity with random walk behavior. The list is too extensive for a comprehensive survey, which is beyond the purpose of this study.…”

Market Efficiency in the Emerging Securitized Real Estate Markets

“…They have also been examined for less-developed markets, e.g. Errunza and Losq (1985), Barnes (1986), Laurence (1986, Butler and Malaikah (1992), Agbeyegbe (1994), Huang (1995), Urrutia (1995), Grieb andReyes (1999), Karemera et al (1999), Ojah and Karemera (1999), Chang and Ting (2000), Abraham et al (2002), Ryoo and Smith (2002), Smith et al (2002), and Lim et al…”

Using fuzzy c-means clustering algorithm in financial health scoring

“…In this sense, announced accounting numbers as quantized signals play an important role on changes in beliefs and can cause rapid stock price fluctuations mostly in weak efficient or inefficient markets where investors must actively manage their portfolios in order to expect a proper return in the frame of speculative investment behavior (Fama et al, 1969;Malkiel and Fama, 1970;Harrison and Kreps, 1978;D'Ambrosio, 1980;Harvey, 1993;Urrutia, 1995;Aitken, 1998;Grieb and Reyes, 1999). In other words, especially in short-term, investors buy or sell stocks based on changes in financial health of firms which become clear by recently announced accounting numbers (Core et al, 2003).…”