Český finanční a účetní časopis 2022(2):19-38 | DOI: 10.18267/j.cfuc.575

Are the Czech, Polish, German and Dutch markets taking a random walk?

Jitka Veselá ORCID...1, Alžběta Zíková ORCID...2
1 Vysoká škola ekonomická v Praze, Fakulta financí a účetnictví, katedra bankovnictví a pojišťovnictví, Praha
2 Vysoká škola ekonomická v Praze, Fakulta informatiky a statistiky, katedra statistiky a pravděpodobnosti, Praha

In efficient markets, asset prices perform a random walk. Excessive returns cannot be repeatedly and systematically achieved in such markets. To test the weak form of market efficiency, statistical tests are used to identify dependencies in the movements of asset prices. This paper deals with testing of the weak form of market efficiency using daily data of the development of stock indices on the Czech, Polish, German and Dutch markets in the period 2001-2022. The article uses the runs test, the autocorrelation analysis, two variants of the unit root test and the variance ratio test. The results of the tests performed are mixed. The weakly efficient behavior of the investigated markets was pointed out only by the runs tests and partly by the autocorrelation analysis. According to the runs test, only the Dutch market behaved weakly efficiently in all monitored periods, while the Czech, Polish and German markets behaved weakly efficiently in four of the five monitored periods. Autocorrelation analysis indicated the occurrence of the random walk in some periods especially on the Polish market, partly on the Czech market and rarely on the German market.

Keywords: Efficient market hypothesis; Runs test; Autocorrelation analysis; Unit root test; Variance ratio test.
JEL classification: G14, G15

Received: September 30, 2022; Revised: November 11, 2022; Accepted: November 14, 2022; Prepublished online: December 24, 2022; Published: February 4, 2023  Show citation

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Veselá, J., & Zíková, A. (2022). Are the Czech, Polish, German and Dutch markets taking a random walk? Czech Financial and Accounting Journal, 2022(2), 19-38. doi: 10.18267/j.cfuc.575
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