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Dual long memory property in returns and volatility: Evidence from the CEE countries' stock markets

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  • Kasman, Adnan
  • Kasman, Saadet
  • Torun, Erdost
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    Abstract

    This paper investigates the presence of long memory in the eight Central and Eastern European (CEE) countries' stock market, using the ARFIMA, GPH, FIGARCH and HYGARCH models. The data set consists of daily returns, and long memory tests are carried out both for the returns and volatilities of these series. The results of the ARFIMA and GPH models indicate the existence of long memory in five of eight return series. The results also suggest that long memory dynamics in the returns and volatility might be modeled by using the ARFIMA-FIGARCH and ARFIMA-HYGARCH models. The results of these models indicate strong evidence of long memory both in conditional mean and conditional variance. Moreover, the ARFIMA-FIGARCH model provides the better out-of-sample forecast for the sampled stock markets.

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    Bibliographic Info

    Article provided by Elsevier in its journal Emerging Markets Review.

    Volume (Year): 10 (2009)
    Issue (Month): 2 (June)
    Pages: 122-139

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    Handle: RePEc:eee:ememar:v:10:y:2009:i:2:p:122-139

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    Web page: http://www.elsevier.com/locate/inca/620356

    Related research

    Keywords: ARFIMA FIGARCH Long memory CEEC's stock markets;

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    Cited by:
    1. Ng, Andrew Cheuk-Yin & Li, Johnny Siu-Hang & Chan, Wai-Sum, 2011. "Modeling investment guarantees in Japan: A risk-neutral GARCH approach," International Review of Financial Analysis, Elsevier, vol. 20(1), pages 20-26, January.
    2. Mohamed Chikhi & Anne Péguin-Feissolle & Michel Terraza, 2012. "SEMIFARMA-HYGARCH Modeling of Dow Jones Return Persistence," AMSE Working Papers 1214, Aix-Marseille School of Economics, Marseille, France.
    3. Walid Chkili & Shawkat Hammoudeh & Duc Khuong Nguyen, 2014. "Volatility forecasting and risk management for commodity markets in the presence of asymmetry and long memory," Working Papers 2014-389, Department of Research, Ipag Business School.
    4. Guidi, Francesco & Ugur, Mehmet, 2012. "Are South East Europe stock markets integrated with regional and global stock markets?," MPRA Paper 44133, University Library of Munich, Germany, revised Dec 2012.
    5. Rafik Nazarian & Esmaeil Naderi & Nadiya G. Alikhani & Ashkan Amiri, 2014. "Long Memory Analysis: An Empirical Investigation," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 16-26.
    6. Bentes, Sónia R., 2014. "Measuring persistence in stock market volatility using the FIGARCH approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 408(C), pages 190-197.

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