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

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  • 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.

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File URL: http://www.accessecon.com/pubs/EB/2005/Volume7/EB-04G10005A.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 7 (2005)
Issue (Month): 1 ()
Pages: 1-6

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Handle: RePEc:ebl:ecbull:eb-04g10005

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Cited by:
  1. 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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