On the detection of extreme movements and persistent behavior in Mediterranean stock markets: a wavelet-based approach
AbstractWe combine the global Hurst exponent and Morlet wavelet multi-resolution analysis to investigate the dynamic behavior of six selected stock markets in the Mediterranean region. Specifically, we employ the resonance coefficients and their power spectra to identify potential extreme movements and long-term dependence in stock returns. Using weekly data for the period 2005-2010, our results reveal that the wavelet multi-resolution approach is able to reconstruct the effects of major extreme shocks on stock returns of studied markets, such as the Asian financial crisis, the 9/11 terrorist attacks, and the 2007-2009 financial crisis. Moreover, the wavelet-based global Hurst exponent indicates the presence of long-term dependencies in stock returns of all the considered markets, except for France where the anti-persistent behavior is detected. Overall, our findings are useful to assess stock market efficiency and provide new insights into stock market dynamics over different time scales.
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Bibliographic InfoPaper provided by Department of Research, Ipag Business School in its series Working Papers with number 2014-184.
Length: 25 pages
Date of creation: 25 Feb 2014
Date of revision:
persistence; Mediterranean markets; wavelet analysis; Hurst exponent; return behavior;
Other versions of this item:
- Chaker Aloui & Duc Khuong Nguyen, 2014. "On the detection of extreme movements and persistent behaviour in Mediterranean stock markets: a wavelet-based approach," Applied Economics, Taylor & Francis Journals, vol. 46(22), pages 2611-2622, August.
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-03-30 (All new papers)
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