Long memory in return structures from developed markets
Sharad Nath Bhattacharya / Mousumi Bhattacharya
Army Institute of Management (India)
The present study aimed at investigating the existence of long memory properties in ten developed stock markets across the globe. When return series exhibit long memory, the series realizations are not independent over time and past returns can help predict future returns, thus violating the market efficiency hypothesis. It poses a serious challenge to the supporters of random walk behavior of the stock returns indicating a potentially predictable component in the series dynamics. We computed Hurst-Mandelbrot's Classical R/S statistic, Lo's statistic and semi parametric GPH statistic using spectral regression. The findings suggest existence of long memory in volatility and random walk for logarithmic return series in general for all the selected stock market indices. Findings are in line with the stylized facts of financial time series.
KeyWords: Long memory; Rescaled range; Fractional integration; Spectral regression
DOI: 10.5295/cdg.110312sb
Bibliographic: BHATTACHARYA, S.N.; BHATTACHARYA, M.: "Long memory in return structures from developed markets", Cuadernos de Gestión Vol. 13 - N.º 2 (Año 2013), pp. 127-143. DOI: 10.5295/cdg.110312sb
JEL Classification: C12, C13, C14, C22

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