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Long Memory and Correlation Structures of Select Stock Returns Using Novel Wavelet and Fractal Connectivity Networks

In: Studies in International Economics and Finance

Author

Listed:
  • Avishek Bhandari

    (Institute of Management Technology Hyderabad)

  • Ata Assaf

    (University of Balamand, Lebanon and Cyprus International Institute of Management)

  • Rajendra N. Paramanik

    (Indian Institute of Technology)

Abstract

Despite several attempts in applied econometrics and time series literature to identify the common channels contributing to fractal structures and long memory in multivariate financial time series, we propose a wavelet-based fractal connectivity analysis, which is the first application in economics and financial studies, enabling one to successfully segregate markets into fractally similar or diverse groups and find that developed markets have similar fractal structures. Similarly, stock returns of emerging markets exhibiting long memory tend to follow similar fractal structures. Furthermore, network analyses of fractal connectivity support our findings on market efficiency which has theoretical roots in both fractal and adaptive market hypothesis.

Suggested Citation

  • Avishek Bhandari & Ata Assaf & Rajendra N. Paramanik, 2022. "Long Memory and Correlation Structures of Select Stock Returns Using Novel Wavelet and Fractal Connectivity Networks," India Studies in Business and Economics, in: Naoyuki Yoshino & Rajendra N. Paramanik & Anoop S. Kumar (ed.), Studies in International Economics and Finance, pages 599-616, Springer.
    • Handle: RePEc:spr:isbchp:978-981-16-7062-6_30
    DOI: 10.1007/978-981-16-7062-6_30
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    More about this item

    Keywords

    Long memory; Fractal connectivity; Wavelets; Hurst; Complex networks;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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