ON TESTS FOR LINEARITY, NORMALITY AND STATIONARITY IN SINGAPORE STOCK PRICES

Abstract

In this study, various characteristics of the return series on the S.E.S. share price indices are investigated. In particular, the tests for linearity, normality and stationarity are performed. It is important to note that the test for stationarity refers to testing of the stability of parameters over time; it differs from the usual definition in which the stochastic process is stationary. These tests are selected to determine whether or not the return series exhibit some salient features of the random walk model. It is found that all the obtained results support the rejection of the corresponding null hypothesis. Moreover, it is noted that returns on the Stock Exchange of Singapore show similar anomalies as returns on major stock markets such as that of U.S., Japan and Hong Kong.