Are the Australian and New Zealand stock prices nonlinear with a unit root?

Research output: Contribution to journalArticleResearchpeer-review

11 Citations (Scopus)

Abstract

Whether or not stock prices are characterized by a unit root has important implications for policy. For instance, by applying unit root tests one can deduce whether stock returns can be predicted from previous changes in prices. A finding of a unit root implies that stock returns cannot be predicted. This paper investigates whether or not stock prices for Australia and New Zealand can be characterized by a unit root process. An unrestricted two-regime threshold autoregressive model is used with an autoregressive unit root. Among the main results, it is found that the stock prices of both countries are nonlinear processes that are characterized by a unit root process, consistent with the efficient market hypothesis.

Original languageEnglish
Pages (from-to)2161-2166
Number of pages6
JournalApplied Economics
Volume37
Issue number18
DOIs
Publication statusPublished - 10 Oct 2005
Externally publishedYes

Cite this