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Testing of Nonstationary Cycles in Financial Time Series Data

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  • Javier De Peña

    ()

  • Luis A. Gil-Alana

    () (School of Economics and Business Administration, University of Navarra)

Abstract

In this article we propose a new method for testing nonstationary cycles in financial time series data. In particular, we use a procedure due to Robinson (1994) that permits us to test unit root cycles in raw time series. These tests have several distinguishing features compared with other procedures. In particular, they have a standard null limit distribution and they are the most efficient ones when directed against the appropriate alternatives. In addition, the procedure of Robinson (1994) allows us to test unit root cycles at each of the frequencies, and thus permits us to approximate the number of periods per cycle. The results, based on the daily structure of the Spanish stock market prices (IBEX 35) show that some intra-year cycles occur, and they take place at approximately 6, 9 or between 24 and 50 periods.

Suggested Citation

  • Javier De Peña & Luis A. Gil-Alana, 2003. "Testing of Nonstationary Cycles in Financial Time Series Data," Faculty Working Papers 15/03, School of Economics and Business Administration, University of Navarra.
  • Handle: RePEc:una:unccee:wp1503
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    Cited by:

    1. Juncal Cunado & Luis A. Gil-Alana & Rangan Gupta, 2018. "Persistence in Trends and Cycles of Gold and Silver Prices: Evidence from Historical Data," Working Papers 201816, University of Pretoria, Department of Economics.
    2. Guglielmo Maria Caporale & Luis A. Gil-Alana, 2017. "Trends and Cycles in Macro Series: The Case of US Real GDP," CESifo Working Paper Series 6728, CESifo Group Munich.

    More about this item

    Keywords

    Stock market; Unit root cycles; Nonstationarity;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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