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Cross-temporal universality of non-linear dependencies in Asian stock markets

Author

Listed:
  • Kian-Ping Lim

    (Labuan School of International Business and Finance, Universiti Malaysia Sabah)

  • Melvin J. Hinich

    (Applied Research Laboratories, University of Texas at Austin)

Abstract

This 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.

Suggested Citation

  • Kian-Ping Lim & Melvin J. Hinich, 2005. "Cross-temporal universality of non-linear dependencies in Asian stock markets," Economics Bulletin, AccessEcon, vol. 7(1), pages 1-6.
    • Handle: RePEc:ebl:ecbull:eb-04g10005
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    References listed on IDEAS

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    3. Wild, Phillip & Hinich, Melvin J. & Foster, John, 2010. "Are daily and weekly load and spot price dynamics in Australia's National Electricity Market governed by episodic nonlinearity?," Energy Economics, Elsevier, vol. 32(5), pages 1082-1091, September.
    4. Romero-Meza, Rafael & Bonilla, Claudio & Benedetti, Hugo & Serletis, Apostolos, 2015. "Nonlinearities and financial contagion in Latin American stock markets," Economic Modelling, Elsevier, vol. 51(C), pages 653-656.
    5. Alexandru Todea & Adrian Zoicas-Ienciu & Angela-Maria Filip, 2009. "Profitability of the Moving Average Strategy and the Episodic Dependencies: Empirical Evidence from European Stock," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 63-72.
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    7. Henryk Gurgul & Robert Syrek, 2010. "Polish stock market and some foreign markets - dependence analysis by regime-switching copulas," Managerial Economics, AGH University of Science and Technology, Faculty of Management, vol. 8, pages 21-39.
    8. Alexandru Todea & Maria Ulici & Simona Silaghi, 2009. "Adaptive Markets Hypothesis - Evidence from Asia-Pacific Financial Markets," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 1(1), pages 007-013, December.
    9. Claudia Sanhueza & Dante Contreras & Angela Denis, 2012. "Terremoto y sus efectos sobre el bienestar: un análisis multidimensional," Working Papers 35, Facultad de Economía y Empresa, Universidad Diego Portales.
    10. Veli YILANCI, 2012. "Detection Of Nonlinear Events In Turkish Stock Market," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 7(1(19)/ Sp), pages 93-96.
    11. Claudeci Da Silva & Hugo Agudelo Murillo & Joaquim Miguel Couto, 2014. "Early Warning Systems: Análise De Ummodelo Probit De Contágio De Crise Dos Estados Unidos Para O Brasil(2000-2010)," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting] 110, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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