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STOCK PRICES AND EXCESSIVE VOLATILITY: SOME EVIDENCE FOR THE FT ORDINARY SHARE INDEX
Author(s) -
MacDonald Ronald
Publication year - 1994
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1994.tb00305.x
Subject(s) - economics , volatility (finance) , stock (firearms) , financial economics , econometrics , index (typography) , stock market index , monetary economics , stock market , mechanical engineering , paleontology , horse , engineering , biology , world wide web , computer science
In this paper the efficiency of the UK stock market is examined using the FT Ordinary share price and dividend indices for the period January 1947 to June 1987. In particular, we examine the validity of the present value model of stock prices using a vector error correction model (VECM). Amongst the findings reported in the paper are that stock prices and dividends are cointegrated and the cross‐equation restrictions imposed on the VECM are strongly rejected.