Comparisons of one period and multi period returns are used to test the random walk hypothesis and to confirm market efficiency.
The Runs test, is a non-parametric test in which the total number of sequences of consecutive positive and negative returns is tabulated and compared against its sampling distribution under the random walk hypothesis.
Testing random walk hypothesis
for Indian stock market Indices.
With regard to Groenewold (1997) and Lee and Mathur (1999) conclusions, Worthington and Higgs (2004) tested the random walk hypothesis in 16 developed markets (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom) from December 1987 to May 2003 using serial correlation, runs, unit root and multiple variance ratio tests.
Laurence (1986) studied on the KLSE stock exchange in Malaysia and SES stock exchange in Singapore to find out the random walk hypothesis for the period 1973 to 1978.
Ahmad, Ashraf and Ahmed (2006) rejected the random walk hypothesis of nifty and sensex using parametric and non-parametric techniques.
From the data analysis, we conclude that the random walk hypothesis for Nifty and Sensex is rejected during the whole four year period of study.
Other applications are in the field of finance, where attempts have been made to predict stock returns, prices as well as to test the random walk hypothesis
and other aspects of the efficient market hypothesis under a different set of assumptions than are traditionally needed.
In the first scenario, the true model is assumed to be the one consistent with the random walk hypothesis
Pant and Bishnoi (2002) tested the random walk hypothesis
using few indices from NSE and BSE in India for the period starting April 1996 to June 2001.
time series, this study investigates the random walk hypothesis
in nine major foreign stock market indices.
A fording indicative of a Markov chain provides evidence against the random walk hypothesis
and suggests that Turkish IPO performance may be predictable.