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Do the Stock Market Indices Follow a Random Walk?

Do the Stock Market Indices Follow a Random Walk?

Cristina Vasco, Pedro Pardal, Rui Teixeira Dias
Copyright: © 2021 |Pages: 22
ISBN13: 9781799866435|ISBN10: 1799866432|EISBN13: 9781799866442
DOI: 10.4018/978-1-7998-6643-5.ch022
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MLA

Vasco, Cristina, et al. "Do the Stock Market Indices Follow a Random Walk?." Handbook of Research on Financial Management During Economic Downturn and Recovery, edited by Nuno Miguel Teixeira and Inês Lisboa, IGI Global, 2021, pp. 389-410. https://doi.org/10.4018/978-1-7998-6643-5.ch022

APA

Vasco, C., Pardal, P., & Dias, R. T. (2021). Do the Stock Market Indices Follow a Random Walk?. In N. Teixeira & I. Lisboa (Eds.), Handbook of Research on Financial Management During Economic Downturn and Recovery (pp. 389-410). IGI Global. https://doi.org/10.4018/978-1-7998-6643-5.ch022

Chicago

Vasco, Cristina, Pedro Pardal, and Rui Teixeira Dias. "Do the Stock Market Indices Follow a Random Walk?." In Handbook of Research on Financial Management During Economic Downturn and Recovery, edited by Nuno Miguel Teixeira and Inês Lisboa, 389-410. Hershey, PA: IGI Global, 2021. https://doi.org/10.4018/978-1-7998-6643-5.ch022

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Abstract

This chapter aims to test the hypothesis of an efficient market, in its weak form, in the stock markets of Brazil, China, South Korea, USA, Spain, Italy, in the period from December 2, 2020 to May 12, 2020. The results show that the market efficiency hypothesis is rejected in all markets. In corroboration the DFA exponents show long memories, which put in question the market efficiency, in its weak form, suggesting that the stock markets analyzed show some predictability. In conclusion, investors should avoid investing in stock markets, at least while this pandemic lasts, and invest in less risky markets in order to mitigate risk and improve the efficiency of their portfolios.

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