Publication Date

October 2007

Publication Details

Chancharat, S and Valadkhani, A, Testing for the Random Walk Hypothesis and Structural Breaks in International Stock Prices, Working Paper 07-15, Department of Economics, University of Wollongong, 2007.


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 (1987:12-2005:12). With one structural break, the ZA test results provide evidence in favour of random walk hypothesis in 14 countries. However, when two endogenously-determined structural breaks are considered, this hypothesis was rejected for only five countries, suggesting a robust conclusion regarding the non-stationarity of stock prices world wide. In addition, the dates of structural break in most cases point to the Asian crisis in the period 1996-1998.