Idealized Elliott Waves and Random Walk Tests
Robert R. Prechter, Jr. & Deepak Goel
April 2007
Using standardized tests for randomness, we test the relative
compatibility of the Wave Principle and random walks with the actual stock
market. Unit-root and randomness tests are performed on idealized Elliott
wave patterns, simulated random walks and actual stock market data. No
random walk among 1024 tested fails both of these tests. The stock markets
average score on the tests is much closer to the average score for idealized
waves than to that for random walks. Certain idealized waves fail these tests
about as often as the stock market does. These results indicate that as far as
these tests are concerned, idealized Elliott waves are more like the actual
stock market than random walks are. We use the BDS and Kanzler tests.
Kanzlers test comprises the Phillips Perron test and the augmented Dickey
Fuller test with significance checks for lagged innovations in the latter.
To download a PDF copy of this working paper, click here.
Copyright 2007 Socionomics Foundation
