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Spurious long-range dependence: evidence from Malaysian equity markets

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  • Chin, Wencheong
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    Abstract

    In this paper, a modified variance aggregated-time approach is used to examine the long-range dependence behaviour of the Malaysian stock exchange. We studied the 20 years daily data which included the pre- and post-economic crises encountered in the Malaysian stock exchange. The unawareness of economic shocks and short-range dependence in all the indices has triggered the spurious long-range dependence in our empirical results. It is also found that the modified approach estimation is robust under the presence of short-range dependence.

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    File URL: http://mpra.ub.uni-muenchen.de/7914/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 7914.

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    Date of creation: 2008
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    Handle: RePEc:pra:mprapa:7914

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    Related research

    Keywords: Keywords: long-range dependence; variance aggregated-time plot; financial time series; self-similar process;

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    1. Miller, Merton H & Muthuswamy, Jayaram & Whaley, Robert E, 1994. " Mean Reversion of Standard & Poor's 500 Index Basis Changes: Arbitrage-Induced or Statistical Illusion?," Journal of Finance, American Finance Association, American Finance Association, vol. 49(2), pages 479-513, June.
    2. Muller, Ulrich A. & Dacorogna, Michel M. & Dave, Rakhal D. & Olsen, Richard B. & Pictet, Olivier V. & von Weizsacker, Jacob E., 1997. "Volatilities of different time resolutions -- Analyzing the dynamics of market components," Journal of Empirical Finance, Elsevier, Elsevier, vol. 4(2-3), pages 213-239, June.
    3. Donald W.K. Andrews, 1990. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 943, Cowles Foundation for Research in Economics, Yale University.
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    Cited by:
    1. Kristoufek, Ladislav, 2009. "Distinguishing between short and long range dependence: Finite sample properties of rescaled range and modified rescaled range," MPRA Paper 16424, University Library of Munich, Germany.
    2. Kristoufek, Ladislav, 2009. "Procesy s dlouhou pamětí a jejich vývoj ve výnosech indexu PX v letech 1999 – 2009
      [Long-term memory and its evolution in returns of PX between 1999 and 2009]
      ," MPRA Paper 16435, University Library of Munich, Germany.

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