Stock market prices and long-range dependence
Using the CRSP (Center for Research in Security Prices) daily stock return data, we revisit the question of whether or not actual stock market prices exhibit long-range dependence. Our study is based on an empirical investigation reported in Teverovsky, Taqqu and Willinger  of the modified rescaled adjusted range or R/S statistic that was proposed by Lo  as a test for long-range dependence with good robustness properties under "extra" short-range dependence. Our main conclusion is that because the modified R/S statistic shows a strong preference for accepting the null hypothesis of no long-range dependence, irrespective of whether long-range dependence is present in the data or not, Lo's acceptance of the hypothesis for the CRSP data (i.e., no long-range dependence in stock market prices) is less conclusive than is usually regarded in the econometrics literature. In fact, upon further analysis of the data, we find empirical evidence of long-range dependence in stock price returns, but because the corresponding degree of long-range dependence (measured via the Hurst parameter H) is typically very low (i.e., H-values around 0.60), the evidence is not absolutely conclusive.
Volume (Year): 3 (1999)
Issue (Month): 1 ()
|Note:||received: May 1997; final version received: September 1997|
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/mathematics/quantitative+finance/journal/780/PS2|
When requesting a correction, please mention this item's handle: RePEc:spr:finsto:v:3:y:1999:i:1:p:1-13. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.