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RANDOM WALK TESTS FOR LATIN AMERICAN EQUITY INDEXES AND INDIVIDUAL FIRMS
Author(s) -
Grieb Terrance,
Reyes Mario G.
Publication year - 1999
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1999.tb00701.x
Subject(s) - mean reversion , random walk , equity (law) , stock (firearms) , economics , econometrics , financial economics , statistics , mathematics , geography , archaeology , political science , law
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.