Chancharat, Surachai and Valadkhani, Abbas, 2007, Structural breaks and testing for the random walk hypothesis in international stock prices, Journal of the Korean Economy, 8(1), 21-38.
This paper examines whether stock prices for 16 countries are trend stationary or follow a random walk process using the (Zivot and Andrews, 1992) and (Lumsdaine and Papell, 1997) tests and monthly data (1987:12-2007:04). With one and two structural breaks, the ZA and LP test results provide evidence in favour of random walk hypothesis in 12 and 11 countries, respectively. Thus based on our empirical results the stock market price indices in majority of the countries exhibit a random walk. In addition, the dates of structural break in most cases point to the Asian crisis in the period 1996-1998.