A GARCH Model for Testing Market Efficiency
(2016) In Journal of International Financial Markets, Institutions, and Money 41. p.121-138- Abstract
- In this paper we propose a generalised autoregressive conditional heteroskedasticity (GARCH) model-based test for a unit root. The model allows for two endogenous structural breaks. We test for unit roots in 156 US stocks listed on the NYSE over the period 1980 to 2007. We find that the unit root null hypothesis is rejected in 40% of the stocks, and only in four out of the nine sectors the null is rejected for over 50% of stocks. We conclude with an economic significance analysis, showing that mostly stocks with mean reverting prices tend to outperform stocks with non-stationary prices.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/8516060
- author
- Westerlund, Joakim LU ; Narayan, Paresh and Liu, Puipeng
- organization
- publishing date
- 2016
- type
- Contribution to specialist publication or newspaper
- publication status
- published
- subject
- keywords
- Unit Root, Structural Break, Efficient Market Hypothesis, Stock Price, GARCH
- categories
- Popular Science
- in
- Journal of International Financial Markets, Institutions, and Money
- volume
- 41
- pages
- 121 - 138
- publisher
- North-Holland
- external identifiers
-
- scopus:84960494296
- wos:000373611400008
- ISSN
- 1042-4431
- DOI
- 10.1016/j.intfin.2015.12.008
- language
- English
- LU publication?
- yes
- id
- 06f7dd3e-5fe3-419a-bfab-5855236ecb99 (old id 8516060)
- date added to LUP
- 2016-04-01 11:13:54
- date last changed
- 2024-04-08 02:41:26
@misc{06f7dd3e-5fe3-419a-bfab-5855236ecb99, abstract = {{In this paper we propose a generalised autoregressive conditional heteroskedasticity (GARCH) model-based test for a unit root. The model allows for two endogenous structural breaks. We test for unit roots in 156 US stocks listed on the NYSE over the period 1980 to 2007. We find that the unit root null hypothesis is rejected in 40% of the stocks, and only in four out of the nine sectors the null is rejected for over 50% of stocks. We conclude with an economic significance analysis, showing that mostly stocks with mean reverting prices tend to outperform stocks with non-stationary prices.}}, author = {{Westerlund, Joakim and Narayan, Paresh and Liu, Puipeng}}, issn = {{1042-4431}}, keywords = {{Unit Root; Structural Break; Efficient Market Hypothesis; Stock Price; GARCH}}, language = {{eng}}, pages = {{121--138}}, publisher = {{North-Holland}}, series = {{Journal of International Financial Markets, Institutions, and Money}}, title = {{A GARCH Model for Testing Market Efficiency}}, url = {{http://dx.doi.org/10.1016/j.intfin.2015.12.008}}, doi = {{10.1016/j.intfin.2015.12.008}}, volume = {{41}}, year = {{2016}}, }