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Long Memory in Eastern European Financial Markets Returns

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  • Ciprian Necula
  • Alina-Nicoleta Radu

Abstract

The paper examines the long memory property of stock returns and its implications using daily index returns for eight CEE emerging markets: Romania, Hungary, Czech Republic, Poland, Slovenia, Bulgaria, Slovakia, and Croatia. Several nonparametric methods for testing for long memory are employed, as well as parametric long memory models. The ARFIMA-FIGARCH model seems the most appropriate specification since the nonlinearity tests can not reject the null of independent and identically distributed residuals, implying that this specification accounts for the nonlinearity in the data. The estimated fractional differencing parameter is statistically significant in seven of the eight emerging economies employed in the study, suggesting the presence of long memory in the returns in these financial markets.

Suggested Citation

  • Ciprian Necula & Alina-Nicoleta Radu, 2012. "Long Memory in Eastern European Financial Markets Returns," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 25(2), pages 316-377, January.
    • Handle: RePEc:taf:reroxx:v:25:y:2012:i:2:p:316-377
    DOI: 10.1080/1331677X.2012.11517512
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    Citations

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    Cited by:

    1. Tihana Škrinjarić, 2019. "Time Varying Spillovers between the Online Search Volume and Stock Returns: Case of CESEE Markets," IJFS, MDPI, vol. 7(4), pages 1-30, October.
    2. Vasile Brătian & Ana-Maria Acu & Camelia Oprean-Stan & Emil Dinga & Gabriela-Mariana Ionescu, 2021. "Efficient or Fractal Market Hypothesis? A Stock Indexes Modelling Using Geometric Brownian Motion and Geometric Fractional Brownian Motion," Mathematics, MDPI, vol. 9(22), pages 1-20, November.
    3. Tihana Škrinjarić, 2018. "Testing for Seasonal Affective Disorder on Selected CEE and SEE Stock Markets," Risks, MDPI, vol. 6(4), pages 1-26, December.
    4. Krzysztof DRACHAL, 2017. "Volatility Clustering, Leverage Effects and Risk-Return Tradeoff in the Selected Stock Markets in the CEE Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 37-53, September.
    5. Victor Dragota & Dragos Stefan Oprea, 2014. "Informational Efficiency Tests on the Romanian Stock Market: A Review of the Literature," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 6(1), pages 015-028, June.
    6. Güngör Arifenur & Güngör Mahmut Sami, 2024. "The Nexus Between Economic Policy Uncertainty and Stock Market Volatility in the CEE-3 Countries," South East European Journal of Economics and Business, Sciendo, vol. 19(2), pages 60-81.
    7. Tripathy, Naliniprava, 2022. "Long memory and volatility persistence across BRICS stock markets," Research in International Business and Finance, Elsevier, vol. 63(C).

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