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Discussion Paper Details

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Title: Simulating Stock Returns Under Switching Regimes - A New Test of Market Efficiency

Author(s): David Meenagh, Patrick Minford and David Peel

Publication Date: April 2006

Keyword(s): efficient markets, rational expectations, regime switching and stock returns

Programme Area(s): International Macroeconomics

Abstract: A model of profits switches between four regimes with fixed probabilities; the rationally expected profits stream implies the stock market value. This efficient market model is not rejected by UK post-war time-series behaviour of either profits or the FTSE index.

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Bibliographic Reference

Meenagh, D, Minford, P and Peel, D. 2006. 'Simulating Stock Returns Under Switching Regimes - A New Test of Market Efficiency'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5614