A Garch Model Test of The Random Walk Hypothesis: Empirical Evidence from The Platinum Market

Knowledge Chinhamu, Delson Chikobvu

Abstract


The paper investigates whether there are periods when platinum prices follow the random walk process (weak-form efficient) and periods when they deviate from the random walk theory (mean reversion). Monthly log returns of platinum prices are examined using the Augmented Dickey-Fuller test (ADF) and a GARCH model with time-varying properties. A GARCH model with time-varying properties is able to capture periods when the random walk theory may be true and periods when it may be false. This study confirms the existence of random walk for platinum prices over the period January 1970 to May 2012. From the year 1999 to the year 2010, the drift parameter is positive and statistically significant. Therefore, the platinum market is regarded as weak-form efficient.

DOI: 10.5901/mjss.2014.v5n14p77


Full Text: PDF

Licenza Creative Commons
This work is licensed under Creative Commons Attribution 3.0 License.

Mediterranean Journal of Social Sciences ISSN 2039-9340(Print) ISSN 2039-2117(Online)

Copyright © MCSER-Mediterranean Center of Social and Educational Research

To make sure that you can receive messages from us, please add the 'mcser.org' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders..