Resource title

Random walk or mean reversion - the Danish stock market since World War 1

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Abstract:This paper contributes to the growing literature on mean reversion in stock markets byexamining a newly constructed Danish data set for the period 1922-95. Variance ratio testsclearly reject the random walk hypothesis at the 2-year horizon, that is, the riskiness of a 2-year investment is significantly less than twice the risk of a 1-year investment. Variance ratiotests for 3- and 4-year horizons are not significant under conventional significance levels,whereas autocorrelation tests of the joint hypothesis that there is departure from random walkat all horizons tend to reject the random walk hypothesis and support the mean reversionhypothesis.

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Ole Risager

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eng

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application/pdf

Resource resource URL

http://hdl.handle.net/10398/7617

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