New variance ratio tests to identify random walk from the general mean reversion model

New variance ratio tests to identify random walk from the general mean reversion model

We develop some properties on the autocorrelation of the k-period returns for the general mean reversion (GMR) process in which the stationary component is not restricted to the AR(1) process but takes the form of a general ARMA process. We then derive some properties of the GMR process and three new nonparametric tests comparing the relative variability of returns over different horizons to va...

Variance ratio tests of random walk: An overview

This paper reviews the recent developments in the field of the variance-ratio tests of random walk and martingale hypothesis. In particular, we present the conventional individual and multiple VR tests as well as their improved modifications based on powertransformed statistics, rank and sign tests, subsampling and bootstrap methods, among others. We also re-examine the weak-form efficiency for...

The random walk hypothesis for Chinese stock markets: Evidence from variance ratio tests

This study examines the random walk hypothesis for the Shanghai and Shenzhen stock markets for both A and B shares, using daily data over the period 1992–2007. The hypothesis is tested with new multiple variance ratio tests – Whang-Kim subsampling and Kim’s wild bootstrap tests – as well as the conventional multiple Chow-Denning test. We find that Class B shares for Chinese stock exchanges do n...

Mean Reversion with a Variance Threshold

Starting from a sample path of a multivariate stochastic process, we study several techniques to isolate linear combinations of the variables with a maximal amount of mean reversion, while constraining the variance of the combination to be larger than a given threshold. We show that many of the optimization problems arising in this context can be solved exactly using semidefinite programming an...

Using linear mean and variance technique to evaluate the pattering in random winding process