[R-SIG-Finance] Run tests Fama

[Bastian Offermann]

Hello list,

is anyone of you familiar with Fama's run tests in his 1965 behaviour of 
stock market prices dissertation? I am not quite sure if I understand 
the concept of "runs" correctly. He says *"A run is defined as a 
sequence of price changes of the same sign. For example, a plus run of 
length i is a sequence of i consecutive positive price changes preceded 
and followed by either negative or zero changes."* So far so good.

-1  +5  +6  + 7 -2

So, 5,6,7 should be a plus run of length 3. The total number of runs is 
thus 1 plus, 0 minus, 0 unchanged.

 From a different source I get the impression that the runs are counted 
differently. E.g.

0,-10,1,1,-12,1,-10,-5,1,4,-4,1,0,-11,3,-12,-10,-1,0,1

13 runs. It does not really say how many of each, confusing me.

Any my code does not really match the result for the long vector. Thanks 
for your input.

Regards



rsp500 <- c(0,-10,1,1,-12,1,-10,-5,1,4,-4,1,0,-11,3,-12,-10,-1,0,1)
rsp500 <- c(-1,5,6,7,-2)
pos <- rsp500[rsp500>0]
neg <- rsp500[rsp500<0]
m <- (length(rsp500)^2 + length(rsp500) - length(pos)^2 - 
length(neg)^2)/length(rsp500) # no. of expected runs
runplus <- 0
runminus <- 0
runequal <- 0
i <- 1
while(i <(length(rsp500)-1)) {
                            if(rsp500[i+1] > 0 & rsp500[i] < 0) runplus 
<- runplus + 1
                            if(rsp500[i+1] < 0 & rsp500[i] > 0) runminus 
<- runminus + 1
                            if(rsp500[i+1] < 0 & rsp500[i] < 0 & 
rsp500[i+1] == rsp500[i]) runequal <- runequal + 1
                            if(rsp500[i+1] > 0 & rsp500[i] > 0 & 
rsp500[i+1] == rsp500[i]) runequal <- runequal + 1
                            i <- i + 1                          
                           }