Multiple variance ratio test under heteroskedasticity (Excel)

Do stock returns follow random walks? Are markets efficient? The heteroskedasticity-robust multiple variance ratio test of Chow and Denning (1993) is a powerful tool that can help answer this question. Today we are discussing the mathematics of the test, comparing it to the simple homoscedastic variance ratio test, and applying it to test market efficiency in SP500 over the past five years.
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[@NEDLeducation]

You can find the spreadsheets for this video and some additional materials here: drive.google.com/drive/folders/1sP40IW0p0w5IETCgo464uhDFfdyR6rh7
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[@jamesroche5934]

Can you provide further clarity on your final conclusion based on the chow-denning adjustment? Is there partial evidence of weak form market inefficiency?

[@NEDLeducation]

Hi James, and thanks for the question! As per the test output, there is no evidence of market inefficiency if heteroskedasticity and multiple testing are adjusted for due to the Chow-Denning p-value being above 10%.

[@yujunliu8581]

Thank you so much!

[@sokakopa2134]

Excellent as always! My Notes:
00:59 Reminder: VRT
3:00 Principles: extension of McKinley and Lo
5:58 Homeoskedasticity case
10:22 Accounting for Heteroskedasticity: Delta of Autocorrelation coefficient
15:05 Z-stat comparison (Homeo- Vs Heteroskedasticity)
18:00 Multiple testing adjustment: Chow and Denning Method
19:30 Conclusion: Type 1 error

[@noldy90]

Wellcome Again...