Analysis of the Random Walk Hypothesis in Tehran Stock Exchange using Variance Ratio Test

Document Type : Research Paper

Authors

1 Assistant Prof. of Razi University, Iran

2 M.A., Razi University, Iran

3 MA. in Razi University, Iran

Abstract

Abstract: Random Walk Hypothesis and Stock market efficiency have been examined by researchers for years and different methods have been used to test these hypotheses but little attention has been paid to the variance ratio tests. Accordingly, in this study, the hypothesis is tested with the single Lo & Mackinlay variance ratio test (LOMAC), the multiple variance ratio test of Chow and Denning (CD), Richardson – Smith, Belaire – Franch & Contreras and Bootstrapping Kim .We employed four indices including TEPIX, Financial, Industry and TEDPIX for the period of 2007 to 2011 and the results indicated that the random walk hypothesis is rejected and the stock market is inefficient. Furthermore, there exists mean reversion in TEDPIX index.

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Accounting and Auditing Review
Volume 19, Issue 3
October 2012
Pages 79-98

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