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  • Are the Australian and New Zealand Stock Prices Nonlinear with a Unit Root?

    Author(s)
    Narayan, Paresh
    Griffith University Author(s)
    Narayan, Paresh
    Year published
    2005
    Metadata
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    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 ...
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    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.
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    Journal Title
    APPLIED ECONOMICS
    Volume
    37
    DOI
    https://doi.org/10.1080/00036840500217887
    Subject
    Applied Economics
    Econometrics
    Banking, Finance and Investment
    Publication URI
    http://hdl.handle.net/10072/4463
    Collection
    • Journal articles

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