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Long Term Dependence in Stock Returns

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Author Info

  • Christopher F. Baum

    ()
    (Boston College)

  • John Barkoulas

    (Boston College)

Abstract

This paper investigates the presence of fractal dynamics in stock returns. We improve upon existing literature in two ways: i) instead of rescaled-range analysis, we use the more efficient semi- nonparametric procedure suggested by Geweke and Porter-Hudak (GPH, 1983), and ii) to ensure robustness, we apply the GPH test to a variety of aggregate and sectoral stock indices and individual companies' stock returns series at both daily and monthly frequencies. Our results indicate that fractal structure is not exhibited by stock indices, but it may characterize the behavior of some individual stock returns series.

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File URL: http://fmwww.bc.edu/EC-P/wp314.pdf
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Bibliographic Info

Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 314..

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Length: 12 pages
Date of creation: 01 Jan 1996
Date of revision:
Publication status: published, Economics Letters, 53:3, 253-259.
Handle: RePEc:boc:bocoec:314

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Postal: Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA
Phone: 617-552-3670
Fax: +1-617-552-2308
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Web page: http://fmwww.bc.edu/EC/
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Related research

Keywords: stock returns; long memory; fractal dynamics; spectral regression;

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References

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  1. Cheung, Yin-Wong & Lai, Kon S., 1995. "A search for long memory in international stock market returns," Journal of International Money and Finance, Elsevier, vol. 14(4), pages 597-615, August.
  2. Andrew W. Lo, 1989. "Long-term Memory in Stock Market Prices," NBER Working Papers 2984, National Bureau of Economic Research, Inc.
  3. B. Mandelbrot, 1972. "Statistical Methodology For Nonperiodic Cycles: From The Covariance To Rs Analysis," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 1, number 3, pages 259-290 National Bureau of Economic Research, Inc.
  4. Victor Chow, K. & Denning, Karen C. & Ferris, Stephen & Noronha, Gregory, 1995. "Long-term and short-term price memory in the stock market," Economics Letters, Elsevier, vol. 49(3), pages 287-293, September.
  5. Greene, Myron T. & Fielitz, Bruce D., 1977. "Long-term dependence in common stock returns," Journal of Financial Economics, Elsevier, vol. 4(3), pages 339-349, May.
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