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Real and Spurious Long-Memory Properties of Stock-Market Data

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  • Lobato, Ignacio N
  • Savin, N E

Abstract

The authors test for the presence of long memory in daily stock returns and their squares using a robust semiparametric procedure of I. Lobato and P. M. Robinson (1997). Spurious results can be produced by nonstationarity and aggregation. The authors address these problems by analyzing subperiods of returns and using individual stocks. The test results show no evidence of long memory in the returns. By contrast, there is strong evidence in the squared returns.

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Bibliographic Info

Article provided by American Statistical Association in its journal Journal of Business and Economic Statistics.

Volume (Year): 16 (1998)
Issue (Month): 3 (July)
Pages: 261-68

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Handle: RePEc:bes:jnlbes:v:16:y:1998:i:3:p:261-68

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  1. Lo, Andrew W. (Andrew Wen-Chuan), 1989. "Long-term memory in stock market prices," Working papers 3014-89., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  2. Granger, C. W. J., 1980. "Long memory relationships and the aggregation of dynamic models," Journal of Econometrics, Elsevier, vol. 14(2), pages 227-238, October.
  3. repec:att:wimass:9208 is not listed on IDEAS
  4. Ding, Zhuanxin & Granger, Clive W. J. & Engle, Robert F., 1993. "A long memory property of stock market returns and a new model," Journal of Empirical Finance, Elsevier, vol. 1(1), pages 83-106, June.
  5. Pinkse, Joris, 1998. "A consistent nonparametric test for serial independence," Journal of Econometrics, Elsevier, vol. 84(2), pages 205-231, June.
  6. repec:att:wimass:9523 is not listed on IDEAS
  7. Grossman, Sanford J & Zhou, Zhongquan, 1996. " Equilibrium Analysis of Portfolio Insurance," Journal of Finance, American Finance Association, vol. 51(4), pages 1379-1403, September.
  8. Ananth Madhavan & Matthew Richardson & Mark Roomans, . "Why Do Security Prices Change? A Transaction-Level Analysis of NYSE Stocks," Rodney L. White Center for Financial Research Working Papers 20-94, Wharton School Rodney L. White Center for Financial Research.
  9. Lobato, Ignacio N & Robinson, Peter M, 1998. "A Nonparametric Test for I(0)," Review of Economic Studies, Wiley Blackwell, vol. 65(3), pages 475-95, July.
  10. Brock, William A. & Kleidon, Allan W., 1992. "Periodic market closure and trading volume : A model of intraday bids and asks," Journal of Economic Dynamics and Control, Elsevier, vol. 16(3-4), pages 451-489.
  11. Stoll, Hans R. & Whaley, Robert E., 1990. "The Dynamics of Stock Index and Stock Index Futures Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 25(04), pages 441-468, December.
  12. Loretan, Mico & Phillips, Peter C. B., 1994. "Testing the covariance stationarity of heavy-tailed time series: An overview of the theory with applications to several financial datasets," Journal of Empirical Finance, Elsevier, vol. 1(2), pages 211-248, January.
  13. Hidalgo, Javier & Robinson, Peter M., 1996. "Testing for structural change in a long-memory environment," Journal of Econometrics, Elsevier, vol. 70(1), pages 159-174, January.
  14. Greene, Myron T. & Fielitz, Bruce D., 1977. "Long-term dependence in common stock returns," Journal of Financial Economics, Elsevier, vol. 4(3), pages 339-349, May.
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