Cross-temporal universality of non-linear dependencies in Asian stock markets
AbstractThis study utilizes the Hinich portmanteau bicorrelation test in conjunction with the windowed testing procedure to examine the cross-temporal universality of non-linear dependencies in the returns series for Asian stock market indices. As a whole, the detected non-linear dependencies do not appear to be persistent or stable across time for all the stock markets. In particular, the underlying process is of a switching type, with the pure noise process from time to time switches to a non-linear dependent stochastic process for some unknown length of time, and then switches back to pure-noise. This provides a plausible explanation for the disappointing forecasting performance of many non-linear models, as these existing models do not take note of the episodic transient nature of the non-linear dependency structures.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 7 (2005)
Issue (Month): 1 ()
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- G1 - Financial Economics - - General Financial Markets
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