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Long-Term Memory in Stock Market Prices: International Evidence

Author

Listed:
  • Shibley Sadique

    (Department of Economics and Finance, La Trobe University)

  • Param Silvapulle

    (Department of Economics and Finance, La Trobe University)

Abstract

It has been argued that research on market efficiency should be evaluated in terms of whether it improves our ability to predict the time series of security returns. Much recent work has addressed the issue of the presence of long memory components in stock prices because of the controversial implications of such a finding for market efficiency and for martingale models of asset prices used in financial economics and technical trading rules used for forecasting. This paper examines the presence of long memory in the stock returns of seven countries, namely, Australia, Japan, Korea, Malaysia, New Zealand, Singapore and the USA. The classical and modified rescaled range tests, the semi-parametric test proposed by Geweke and Porter-Hudak (1983), the frequency-domain score test proposed by Robinson [1994] and its time-domain counterpart derived by Silvapulle (1996) are applied to these returns in order to detect the long memory property. The evidence suggests that the Korean and the New Zealand stock returns are long-term dependent.

Suggested Citation

  • Shibley Sadique & Param Silvapulle, 1998. "Long-Term Memory in Stock Market Prices: International Evidence," Working Papers 1998.10, School of Economics, La Trobe University.
  • Handle: RePEc:ltr:wpaper:1998.10
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