Australian All Ordinaries Share Price Index Futures and Random Walks

The study covers the period 16/3/83 to 31/12/87, using daily futures prices to provide descriptive statistics and statistical tests for a random walk. The study period falls naturally into two periods, the pre-crash and period including the 1987 crash. The random walk hypothesis provides a “rough” description of futures price changes in the pre-crash period but is rejected for the full period. Some indication of the effect of the 1987 crash period on share price index futures prices is demonstrated via descriptive statistics. Day in the week effects are isolated both in terms of variance and returns. The existence of these effects suggest that random walk is at best an imperfect description of price changes over time