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Long Memory in the Turkish Stock Market Return and Volatility

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  • Adnan Kasman
  • Erdost Torun
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    Abstract

    This paper examines the dual long memory property of the Turkish stock market. The data set consists of daily returns, and long memory tests are carried out both for the returns and volatility. The results indicate that long memory dynamics in the returns and volatility might be modeled by using the ARFIMA-FIGARCH model. The results of the ARFIMAFIGARCH model show strong evidence of long memory in both returns and volatility. The long memory in returns implies that stock prices follow a predictable behavior, which is inconsistent with the efficient market hypothesis. The evidence of long memory in volatility, however, shows that uncertainty or risk is an important determinant of the behavior of daily stock data in the Turkish stock market.

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    Bibliographic Info

    Article provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its journal Central Bank Review.

    Volume (Year): 7 (2007)
    Issue (Month): 2 ()
    Pages: 13-27

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    Handle: RePEc:tcb:cebare:v:7:y:2007:i:2:p:13-27

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    Related research

    Keywords: ARFIMA; FIGARCH; Long memory; Turkish stock market;

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    References

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    1. John T. Barkoulas & Christopher F. Baum & Nickolaos Travlos, 1996. "Long Memory in the Greek Stock Market," Boston College Working Papers in Economics, Boston College Department of Economics 356., Boston College Department of Economics.
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    5. Bhardwaj, Geetesh & Swanson, Norman R., 2006. "An empirical investigation of the usefulness of ARFIMA models for predicting macroeconomic and financial time series," Journal of Econometrics, Elsevier, Elsevier, vol. 131(1-2), pages 539-578.
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    7. Baillie, Richard T. & Bollerslev, Tim & Mikkelsen, Hans Ole, 1996. "Fractionally integrated generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, Elsevier, vol. 74(1), pages 3-30, September.
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    Cited by:
    1. Mendoza Sandoval Sergio & Cruz Ake Salvador & Venegas Martínez Francisco, 2014. "Valuación con opciones reales de proyectos con flujos correlacionados con fundamentales económicos y con saltos extremos Viabilidad del caso COMERCI UCB," Contaduría y Administración:Revista Internacional, Accounting and Management: International Journal, Accounting and Management: International Journal, vol. 59(1), pages 63-93, enero-mar.
    2. Hiremath, Gourishankar S & Bandi, Kamaiah, 2011. "Testing Long Memory in Stock Returns of Emerging Markets: Some Further Evidence," MPRA Paper 48517, University Library of Munich, Germany.

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