Variance ratio tests and their generalizations for testing the market efficiency

This paper reviews the variance-ratio tests of random walk hypothesis. In this work, various tests including the individual and multiple variance-ratio, rank, sign, and subsampling tests are presented. Powers of tests were examined by using Monte-Carlo simulations. We investigated the weak-form efficiency for Tallinn, Riga and Vilnius stock markets indices. It was shown, that stock prices of Vilnius stock market follows a random walk, but there are some exceptions of Tallin and Riga stock markets. Also, we present the modifications of Kim test, that is based on the partial sums ratio. It was demonstrated, that test modifications have no size distortions and improve tests power