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G7 Stock Markets, Who Is The First To Defeat The Dcca Correlation?

Author

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  • Paulo Ferreira

    (CEFAGE-UE, IIFA, Universidade de Évora, Largo dos Colegiais 2, 7000 Évora, Portugal; Departamento de Ciência e Tecnologia Animal, Escola Superior Agrária de Elvas, Instituto Politécnico de Portalegre, Portugal)

  • Andreia Dionísio

    (CEFAGE-UE, IIFA, Universidade de Évora, Largo dos Colegiais 2, 7000 Évora, Portugal)

Abstract

The Efficient Market Hypothesis (EMH), one of the most important hypothesis in financial economics, argues that return rates have no memory (correlation) which implies that agents cannot make abnormal profits in financial markets, due to the possibility of arbitrage operations. We analyse G7 stock returns using detrended cross-correlation analysis and its correlation coefficient, a methodology which analyzes long-range behavior between series. Our main results show that the longrange correlation of return rates is significant till (at least) the 140th lag, which corresponds to about seven months. The stock markets that show higher serial dependence, evidence a strong correlatio

Suggested Citation

  • Paulo Ferreira & Andreia Dionísio, "undated". "G7 Stock Markets, Who Is The First To Defeat The Dcca Correlation?," Review of Socio - Economic Perspectives 201605, Reviewsep.
    • Handle: RePEc:aly:journl:201605
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    References listed on IDEAS

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    2. Malmsten, Hans & Teräsvirta, Timo, 2004. "Stylized Facts of Financial Time Series and Three Popular Models of Volatility," SSE/EFI Working Paper Series in Economics and Finance 563, Stockholm School of Economics, revised 03 Sep 2004.
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    5. Zebende, G.F. & da Silva, M.F. & Machado Filho, A., 2013. "DCCA cross-correlation coefficient differentiation: Theoretical and practical approaches," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(8), pages 1756-1761.
    6. Cao, Guangxi & Xu, Longbing & Cao, Jie, 2012. "Multifractal detrended cross-correlations between the Chinese exchange market and stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(20), pages 4855-4866.
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    Cited by:

    1. Ferreira, Paulo & Kristoufek, Ladislav & Pereira, Eder Johnson de Area Leão, 2020. "DCCA and DMCA correlations of cryptocurrency markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 545(C).
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    4. Ferreira, Paulo, 2018. "Long-range dependencies of Eastern European stock markets: A dynamic detrended analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 505(C), pages 454-470.

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    More about this item

    Keywords

    Efficient Market Hypothesis; long-range correlation coefficient; lag; detrended cross-correlation analysis.;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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