In the last few years several research studies challenged the traditional weak form efficiency tests of the stock market. These studies suggested mean aversion/reversion behaviour of stock market returns. This is a pioneer study of the Portuguese stock market, and uses nominal, real and excess returns, computed for various longer-horizons. The ordinary least square regression methodology was used. The statistical significance of the results was studied using traditional parametric tests as well as non-parametric tests. The non-parametric test does not require the assumption of normality and the use of correction procedures only valid asymptotically, which an advantage is due to the relative small sample size of these studies. The evidence is mixed, as we detected the presence of tendencies towards mean aversion and mean reversion. These results, however, do not necessarily reject the weak form market efficiency hypothesis.
market efficiency; stock market anomalies; statistical simulation methods; Monte Carlo methods
