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Long-term dependence in stock returns

  • Barkoulas, John T.
  • Baum, Christopher F.

This paper investigates the presence of fractal dynamics in stock returns. We improve upon existing literature in two ways: i) instead of rescaled-range analysis, we use the more efficient semi- nonparametric procedure suggested by Geweke and Porter-Hudak (GPH, 1983), and ii) to ensure robustness, we apply the GPH test to a variety of aggregate and sectoral stock indices and individual companies' stock returns series at both daily and monthly frequencies. Our results indicate that fractal structure is not exhibited by stock indices, but it may characterize the behavior of some individual stock returns series.

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 53 (1996)
Issue (Month): 3 (December)
Pages: 253-259

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Handle: RePEc:eee:ecolet:v:53:y:1996:i:3:p:253-259
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  1. Victor Chow, K. & Denning, Karen C. & Ferris, Stephen & Noronha, Gregory, 1995. "Long-term and short-term price memory in the stock market," Economics Letters, Elsevier, vol. 49(3), pages 287-293, September.
  2. Greene, Myron T. & Fielitz, Bruce D., 1977. "Long-term dependence in common stock returns," Journal of Financial Economics, Elsevier, vol. 4(3), pages 339-349, May.
  3. B. Mandelbrot, 1972. "Statistical Methodology for Nonperiodic Cycles: From the Covariance To R/S Analysis," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 1, number 3, pages 259-290 National Bureau of Economic Research, Inc.
  4. Lo, Andrew W. (Andrew Wen-Chuan), 1989. "Long-term memory in stock market prices," Working papers 3014-89., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  5. Cheung, Yin-Wong & Lai, Kon S., 1995. "A search for long memory in international stock market returns," Journal of International Money and Finance, Elsevier, vol. 14(4), pages 597-615, August.
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