Stock market returns in thin markets: evidence from the Vienna Stock Exchange

Abstract

This paper uses the multiple variance ratio test procedure developed by Chow and Denning (1993) to test for a random walk of stock returns on the Vienna Stock Exchange. I find that with daily data the test rejects the random walk hypothesis at all conventional significance levels for each and every title and for both indices tested. Testing the hypothesis on a subsample running from 1990 to 1992 suggests that, as the market becomes institutionally more mature and more liquid, returns approach a random walk. Individual shares seem to follow a random walk when weekly returns are considered, while the hypothesis is rejected for both indices.