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On tests for long memory in Pacific Basin stock returns

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  • Koong, C.S.
  • Tsui, Albert K.
  • Chan, W.S.

Abstract

There has been growing interest in studying the behaviour of stock returns over long and short horizons. Previous studies showed that while autocorrelations in returns usually are positive or close to zero over short horizons, they become negative over long horizons. In this article, we examine the behaviour of stock returns among the four Pacific Basin markets. Three tests which are robust to short-term dependence and conditional heteroskdasticity are employed. They are the modified rescaled range test, the fractional differencing tests based on raw periodograms and on the Bartlett window-smoothed periodograms, respectively. The empirical findings in general provide little support for long memory in Pacific Basin stock returns.

Suggested Citation

  • Koong, C.S. & Tsui, Albert K. & Chan, W.S., 1997. "On tests for long memory in Pacific Basin stock returns," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 43(3), pages 445-449.
    • Handle: RePEc:eee:matcom:v:43:y:1997:i:3:p:445-449
    DOI: 10.1016/S0378-4754(97)00030-X
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    References listed on IDEAS

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    1. M. Mufakharul Islam, 1986. "Discussion," The Indian Economic & Social History Review, , vol. 23(2), pages 217-226, June.
    2. Fama, Eugene F & French, Kenneth R, 1988. "Permanent and Temporary Components of Stock Prices," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 246-273, April.
    3. Lo, Andrew W, 1991. "Long-Term Memory in Stock Market Prices," Econometrica, Econometric Society, vol. 59(5), pages 1279-1313, September.
    4. Poterba, James M. & Summers, Lawrence H., 1988. "Mean reversion in stock prices : Evidence and Implications," Journal of Financial Economics, Elsevier, vol. 22(1), pages 27-59, October.
    5. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
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    Cited by:

    1. Emmanuel Anoruo & Luis Gil-Alana, 2011. "Mean reversion and long memory in African stock market prices," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 35(3), pages 296-308, July.
    2. Yalama, Abdullah & Celik, Sibel, 2013. "Real or spurious long memory characteristics of volatility: Empirical evidence from an emerging market," Economic Modelling, Elsevier, vol. 30(C), pages 67-72.
    3. Yin, Xin-An & Yang, Xiao-Hua & Yang, Zhi-Feng, 2009. "Using the R/S method to determine the periodicity of time series," Chaos, Solitons & Fractals, Elsevier, vol. 39(2), pages 731-745.

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