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On The Forecastability Of Asean-5 Stock Markets Returns Using Time Series Models

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Author Info
Khim-Sen Liew (Universiti Putra Malaysia)
Kian-Ping Lim (Universiti Malaysia Sabah)
Chee-Keong Choong (Universiti Tunku Abdul Rahman)

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Abstract

This study examines the forecastability of ASEAN-5 stock market returns using linear and non-linear time series models. Time series models with GARCH errors are also considered. Based on formal econometrics tests, this study shows that the behaviour of these returns do not follow random walk movement. Results of this study also reveal that all the estimated time series models, both linear and non-linear, have smaller out-of-sample forecast errors than the random walk model. These two findings robustly indicate that returns of ASEAN-5 stock markets do not follow random walk movement and are forecastable. Thus, this study can be taken as providing justification for the work of technical analysts.

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Paper provided by EconWPA in its series Finance with number 0307012.

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Date of creation: 23 Jul 2003
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Handle: RePEc:wpa:wuwpfi:0307012

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Related research
Keywords: Random walk; Time series models; Autoregressive; Smooth Transition Autoregressive; GARCH; Forecasting; ASEAN-5 stock markets.;

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G - Financial Economics

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  6. Dockery, E & Kavussanos, M G, 1996. "Testing the Efficient Market Hypothesis Using Panel Data, with Application to the Athens Stock Market," Applied Economics Letters, Taylor and Francis Journals, vol. 3(2), pages 121-23, February. [Downloadable!] (restricted)
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  11. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April. [Downloadable!] (restricted)
  12. Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. " On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, vol. 48(5), pages 1779-1801, December. [Downloadable!] (restricted)
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  13. Yokuma, J. Thomas & Armstrong, J. Scott, 1995. "Beyond accuracy: Comparison of criteria used to select forecasting methods," International Journal of Forecasting, Elsevier, vol. 11(4), pages 591-597, December. [Downloadable!] (restricted)
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