Nonlinearities and Nonstationarities in Stock Returns
AbstractThis paper addresses the question of whether recent findings of nonlinearities qhave been contaminated by possible shifts in the distribution of the first differences of the logarithms of stock prices indexes The paper develops a testing methodology that formally attempts to discriminate between the two types of rejections of the null of linearity It is shown that structural shifts play an important role in the evolution of financial time series: linear processes with shifts in variance are able to replicate the behavior of the tests introduced in the paper whereas stationary ARCH-type filters show little consistency with the data Moreover it is shown that ARCH models fitted to data generated by a simple one-break linear process exhibit levels of persistence similar to the ones usually reported for high-frequency applications Key words: BDS test Nonlinearity Nonstationarity
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Bibliographic InfoPaper provided by The Johns Hopkins University,Department of Economics in its series Economics Working Paper Archive with number 360.
Date of creation: Jan 1996
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- Elena Rusticelli & Richard Ashley & Estela Bee Dagum & Douglas Patterson, 2009.
"A New Bispectral Test for NonLinear Serial Dependence,"
Taylor & Francis Journals, vol. 28(1-3), pages 279-293.
- Elena Rusticelli & Richard A. Ashley & Estela Bee Dagum & Douglas M. Patterson, 2006. "A New Bispectral Test for Nonlinear Serial Dependence," Working Papers e06-6, Virginia Polytechnic Institute and State University, Department of Economics.
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