Study on the Efficient Market Hypothesis on the Taiwan Stock Market: an Application of the Variance Ratio Test

• Main Authors: Tsai, Chii-Ming, 蔡啟明
• Other Authors: Chih-Young Hung
• Format: Others
• Language: zh-TW
• Published: 1996
• Online Access: http://ndltd.ncl.edu.tw/handle/36493543137857696728

碩士 === 國立交通大學 === 科技管理研究所 === 84 === This study utilizes the multiple variance ratio test as developed in Lo & MacKinlay(1988) and Chow & Denning(1993) to examine the Taiwan stock market.Weekly index returns are derived from the composite value weighted priceindex of Taiwan Stock Exchange recorded in the AREMOS tape. The time periodcovers eleven years from 1985 till 1995. This study also devides the period into two subperiod of 1985-1989 and 1991-1995 respectively to investigate theimpact of the market crash in 1990 on the stock return generating process.Several results are worthy of noting. First, for the overall period and the first half period, the random walk model is rejected for most time lags. How-ever, for the second half period, the test fails to reject the random walkmodel for all lever of time lags. Second, the 1-st order autocorrelations as implied by the variance ratio in the case of two-week-lag suggests the thereis positive autocorrelation for weekly holding period returns for the overallperiod and the first half period. However, the autocorrelation become negativewhen the data of the second half period are used. This seemingly puzzling results maybe interpreted that the positive correlation caused by the problemof smaller price change limits might have declined in the second half periodwhile the mean reverting process caused by the overreaction of the investorsmight have set in.