In this study we re‐examine the presence of random walk in stock prices in Brazil and Mexico. We employ variance ratio tests on weekly stock returns for indexes as well as individual firms. The results reveal mean aversion in Mexico at both the index level and the firm level. In contrast, the Brazil indexes show a greater tendency toward random walk; however, the results for the individual firms suggest mean reversion. The results cannot be attributed to a firm size effect. Evidence is presented in favor of a greater degree of nonsynchronous trading for Brazilian securities than for Mexican securities.

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In this study, we provide some evidence of Granger‐causal transmission of information to the correlation between large‐ and small‐cap stock indexes in the UK. We employ the bivariate Logistic Exponential Generalized Autoregressive Conditional Heteroscedasticity (LEGARCH) specification proposed by Darbar and Deb [Darbar, S. M., & Deb, P. (1999). Linkages among asset markets in the United States—tests in a bivariate GARCH framework. IMF Working Paper WP/99/158; Darbar, S. M., & Deb, P. (2000). Transmission of information and cross‐market correlations. Indiana University–Purdue University Indianapolis Working Paper.] and document correlation persistence, and a two‐way information flow. More specifically, information to the large‐cap stock index positively affects its next period correlation with the small‐cap index, whereas information to the small‐cap index negatively affects its next period correlation with the large‐cap index. We also find evidence supporting the presence of both a January effect and an April effect in both small‐cap and large‐cap returns.

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