Do Shocks to G7 Stock Prices Have a Permanent Effect?: Evidence from Panel Unit Root Tests with Structural Change

Mathematics and Computers in Simulation 77(4): 369-373, 2008

Posted: 8 Jun 2012

See all articles by Paresh Kumar Narayan

Paresh Kumar Narayan

Deakin University - School of Accounting, Economics and Finance

Date Written: June 8, 2012

Abstract

There is a plethora of studies that investigate evidence for the behaviour of stock prices using univariate techniques for unit roots. Whether or not stock prices are characterised by a unit root have implications for the efficient market hypothesis, which asserts that returns of a stock market are unpredictable from previous price changes. The extant literature has found mixed evidence on the integrational properties of stock prices. In this paper, for the first time, we provide evidence on the unit root hypothesis for G7 stock price indices using the Lagrangian multiplier panel unit root test that allows for structural breaks. Our main finding is that stock prices are stationary processes, inconsistent with the efficient market hypothesis.

Suggested Citation

Narayan, Paresh Kumar, Do Shocks to G7 Stock Prices Have a Permanent Effect?: Evidence from Panel Unit Root Tests with Structural Change (June 8, 2012). Mathematics and Computers in Simulation 77(4): 369-373, 2008, Available at SSRN: https://ssrn.com/abstract=2079946

Paresh Kumar Narayan (Contact Author)

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

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