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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)

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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Bibliographic Info

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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Web page: http://128.118.178.162

Related research

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

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  1. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
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  3. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
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  9. Brock, W. & Lakonishok, J. & Lebaron, B., 1991. "Simple Technical Trading Rules And The Stochastic Properties Of Stock Returns," Working papers 90-22, Wisconsin Madison - Social Systems.
  10. Terasvirta, T & Anderson, H M, 1992. "Characterizing Nonlinearities in Business Cycles Using Smooth Transition Autoregressive Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages S119-36, Suppl. De.
  11. Zhen Zhu, 1998. "The random walk of stock prices: evidence from a panel of G-7 countries," Applied Economics Letters, Taylor & Francis Journals, vol. 5(7), pages 411-413.
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