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Long memory revisit in Chinese stock markets: Based on GARCH-class models and multiscale analysis

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  • Lin, Xiaoqiang
  • Fei, Fangyu
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    Abstract

    In the present work we propose the rescaled range analysis (R/S), modified R/S method and detrended fluctuation analysis (DFA) to investigate the long memory property of Chinese stock markets based on the conditional and actual volatility series, and show that the stock markets in China display moderate positive degree of long memory. For the robustness, we implement the multiscale analysis on dynamic changes of time-varying Hurst exponents by applying the rolling window method based on DFA. Our results reveal that APGARCH model with the superior forecasting ability captures the long memory property better than other GARCH-class models for different time scale interval. Interestingly, the time-varying Hurst exponents of the sudden “jumps” for the conditional volatility calculated by the DFA method using the APGARCH model are smaller than that of the actual volatility series, which indicates that APGARCH model may underestimate the long memory property in the Chinese stock market. Our evidences provide new perspectives for the financial market forecasting.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 31 (2013)
    Issue (Month): C ()
    Pages: 265-275

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    Handle: RePEc:eee:ecmode:v:31:y:2013:i:c:p:265-275

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    Web page: http://www.elsevier.com/locate/inca/30411

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    Keywords: GARCH-class models; DFA analysis; R/S analysis; Long memory; SPA;

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    Cited by:
    1. Long, Ling & Tsui, Albert K. & Zhang, Zhaoyong, 2014. "Conditional heteroscedasticity with leverage effect in stock returns: Evidence from the Chinese stock market," Economic Modelling, Elsevier, vol. 37(C), pages 89-102.
    2. Lin, Xiaoqiang & Tang, Zhenpeng & Fei, Fangyu, 2013. "Testing for relationships between Shanghai and Shenzhen stock markets: A threshold cointegration perspective," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(18), pages 4064-4074.
    3. Delavari, Majid & Gandali Alikhani, Nadiya, 2012. "The Effect of Crude Oil Price on the Methanol price," MPRA Paper 49727, University Library of Munich, Germany.

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