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Testing of Nonstationary Cycles in Financial Time Series Data

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Author Info
Javier De Peña ()
Luis A. Gil-Alana () (School of Economics and Business Administration, University of Navarra)

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Abstract

In this article we propose a new method for testing nonstationary cycles in financial time series data. In particular, we use a procedure due to Robinson (1994) that permits us to test unit root cycles in raw time series. These tests have several distinguishing features compared with other procedures. In particular, they have a standard null limit distribution and they are the most efficient ones when directed against the appropriate alternatives. In addition, the procedure of Robinson (1994) allows us to test unit root cycles at each of the frequencies, and thus permits us to approximate the number of periods per cycle. The results, based on the daily structure of the Spanish stock market prices (IBEX 35) show that some intra-year cycles occur, and they take place at approximately 6, 9 or between 24 and 50 periods.

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Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 15/03.

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Length: 20 pages pages
Date of creation: Oct 2003
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Publication status: Published, Review of Quantitative Finance and Accounting, 2006, vol. 27(1)
Handle: RePEc:una:unccee:wp1503

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Related research
Keywords: Stock market; Unit root cycles; Nonstationarity;

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Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies

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