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Long-term dependence in stock returns

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

Abstract

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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Suggested Citation

  • Barkoulas, John T. & Baum, Christopher F., 1996. "Long-term dependence in stock returns," Economics Letters, Elsevier, vol. 53(3), pages 253-259, December.
  • Handle: RePEc:eee:ecolet:v:53:y:1996:i:3:p:253-259
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    References listed on IDEAS

    as
    1. Lo, Andrew W, 1991. "Long-Term Memory in Stock Market Prices," Econometrica, Econometric Society, vol. 59(5), pages 1279-1313, September.
    2. 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.
    3. 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.
    4. 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.
    5. 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.
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    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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