New procedures for testing whether stock price processes are martingales

Details New procedures for testing whether stock price processes are martingales New procedures for testing whether stock price processes are martingales

2009-07-19

arxiv.org/abs/0907.3273v2

Computational Economics, vol.37, No.1, 67-88, 2010

Economy

Quantitative Finance

Statistical Finance

Scientific paper

We propose procedures for testing whether stock price processes are martingales based on limit order type betting strategies. We first show that the null hypothesis of martingale property of a stock price process can be tested based on the capital process of a betting strategy. In particular with high frequency Markov type strategies we find that martingale null hypotheses are rejected for many stock price processes.

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