Persistence Characteristics of Latin American Financial Markets
Static time series models usually assume stationarity, normality, and independence for the increments of financial rates of return. This paper investigates the empirical characteristics of financial rates of return from Latin American stock and currency markets and documents that their empirical rates of return are non-normal, non- stationary and non-ergodic, and that they exhibit long-term dependence. This paper measures the degree of long-term dependence of these financial time series by calculating their global, or homogeneous, Hurst exponents from their wavelet multiresolution analyses (MRA), i.e. from the wavelet resonance coefficients. Visualizations of these resonance coefficients and their power spectra are provided by scalograms and scalegrams, respectively. These visualizations help to identify the long-term dependence characteristics, which cannot be identified by the classical time series analysis, which is based on the stationarity and independence assumptions. Our findings are consistent with some empirical findings from financial market data in the USA, in Europe and in Asia, but extend their domain of empirical investigation.
|Date of creation:||18 Sep 2004|
|Note:||Type of Document - pdf. Kyaw, Nyo Nyo A., Los, Cornelis A. and Zong, Sijing, 'Persistence Characteristics of Latin American Financial Markets' (February 2003). Kent State University Finance Working Paper.|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Laurent Calvet & Adlai Fisher, 2002.
"Multifractality In Asset Returns: Theory And Evidence,"
The Review of Economics and Statistics,
MIT Press, vol. 84(3), pages 381-406, August.
- Laurent-Emmanuel Calvet & Adlai J. Fisher, 2002. "Multifractality in Asset Returns: Theory and Evidence," Post-Print hal-00478175, HAL.
- Bollerslev, Tim & Ole Mikkelsen, Hans, 1996.
"Modeling and pricing long memory in stock market volatility,"
Journal of Econometrics,
Elsevier, vol. 73(1), pages 151-184, July.
- Tom Doan, "undated". "RATS program to replicate Bollerslev-Mikkelson(1996) FIEGARCH models," Statistical Software Components RTZ00173, Boston College Department of Economics.
- Lo, Andrew W, 1991.
"Long-Term Memory in Stock Market Prices,"
Econometric Society, vol. 59(5), pages 1279-1313, September.
- Tom Doan, "undated". "RSSTATISTIC: RATS procedure to compute R/S Statistic (classical or Lo's modified)," Statistical Software Components RTS00191, Boston College Department of Economics.
- Lo, Andrew W. (Andrew Wen-Chuan), 1989. "Long-term memory in stock market prices," Working papers 3014-89., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Andrew W. Lo, 1989. "Long-term Memory in Stock Market Prices," NBER Working Papers 2984, National Bureau of Economic Research, Inc.
- Marco Corazza & A. G. Malliaris, 2005.
"Multi-Fractality in Foreign Currency Markets,"
World Scientific Book Chapters,
in: Economic Uncertainty, Instabilities And Asset Bubbles Selected Essays, chapter 11, pages 151-184
World Scientific Publishing Co. Pte. Ltd..
- Jamdee, Sutthisit & Los, Cornelis A., 2007.
"Long memory options: LM evidence and simulations,"
Research in International Business and Finance,
Elsevier, vol. 21(2), pages 260-280, June.
- Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
- Laurent Calvet & Adlai Fisher & Benoit Mandelbrot, 1999.
"A Multifractal Model of Assets Returns,"
New York University, Leonard N. Stern School Finance Department Working Paper Seires
99-072, New York University, Leonard N. Stern School of Business-.
- Benoit Mandelbrot & Adlai Fisher & Laurent Calvet, 1997. "A Multifractal Model of Asset Returns," Cowles Foundation Discussion Papers 1164, Cowles Foundation for Research in Economics, Yale University.
- Laurent-Emmanuel Calvet & Benoît B. Mandelbrot & Adlai J. Fisher, 2011. "A Multifractal Model of Asset Returns," Working Papers hal-00601870, HAL.
- Mandelbrot, Benoit, 1969. "Long-Run Linearity, Locally Gaussian Process, H-Spectra and Infinite Variances," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(1), pages 82-111, February.
- Sebastian Edwards, 1998. "Capital Inflows into Latin America: A Stop-Go Story?," NBER Working Papers 6441, National Bureau of Economic Research, Inc.
- Karuppiah, Jeyanthi & Los, Cornelis A., 2005.
"Wavelet multiresolution analysis of high-frequency Asian FX rates, Summer 1997,"
International Review of Financial Analysis,
Elsevier, vol. 14(2), pages 211-246.
- Cornelis A. Los & Jeyanthi Karuppiah, 2004. "Wavelet Multiresolution Analysis of High-Frequency Asian FX Rates, Summer 1997," Finance 0409037, EconWPA.
- Cornelis A. Los, 2004.
"Nonparametric Testing of the High-Frequency Efficiency of the 1997 Asian Foreign Exchange Markets,"
- Los, Cornelis A., 1999. "Nonparametric testing of the high-frequency efficiency of the 1997 Asian foreign exchange markets," Journal of Multinational Financial Management, Elsevier, vol. 9(3-4), pages 265-289, November.
- Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 893-920, October.
- Loretan, Mico & Phillips, Peter C. B., 1994.
"Testing the covariance stationarity of heavy-tailed time series: An overview of the theory with applications to several financial datasets,"
Journal of Empirical Finance,
Elsevier, vol. 1(2), pages 211-248, January.
- Loretan, M. & Phillips, P.C.B., 1992. "Testing the Covariance Stationarity of Heavy-Tailed Time Series: An Overview of the Theory with Applications to Several Financial Datasets," Working papers 9208, Wisconsin Madison - Social Systems.
- Baillie, Richard T. & Bollerslev, Tim & Mikkelsen, Hans Ole, 1996.
"Fractionally integrated generalized autoregressive conditional heteroskedasticity,"
Journal of Econometrics,
Elsevier, vol. 74(1), pages 3-30, September.
- Tom Doan, "undated". "RATS programs to replicate Baillie, Bollerslev, Mikkelson FIGARCH results," Statistical Software Components RTZ00009, Boston College Department of Economics.
- Eric Ghysels & Andrew Harvey & Éric Renault, 1995.
CIRANO Working Papers
- Ghysels, E. & Harvey, A. & Renault, E., 1995. "Stochastic Volatility," Papers 95.400, Toulouse - GREMAQ.
- GHYSELS, Eric & HARVEY, Andrew & RENAULT, Eric, 1995. "Stochastic Volatility," CORE Discussion Papers 1995069, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Ghysels, E. & Harvey, A. & Renault, E., 1996. "Stochastic Volatility," Cahiers de recherche 9613, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Ghysels, E. & Harvey, A. & Renault, E., 1996. "Stochastic Volatility," Cahiers de recherche 9613, Universite de Montreal, Departement de sciences economiques.
- Crato, Nuno & de Lima, Pedro J. F., 1994. "Long-range dependence in the conditional variance of stock returns," Economics Letters, Elsevier, vol. 45(3), pages 281-285.
- Baillie, Richard T., 1996. "Long memory processes and fractional integration in econometrics," Journal of Econometrics, Elsevier, vol. 73(1), pages 5-59, July.
- Cheung, Yin-Wong, 1993. "Long Memory in Foreign-Exchange Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 93-101, January.
- Cheung, Yin-Wong & Lai, Kon S., 1995. "A search for long memory in international stock market returns," Journal of International Money and Finance, Elsevier, vol. 14(4), pages 597-615, August.
- Sadique, Shibley & Silvapulle, Param, 2001. "Long-Term Memory in Stock Market Returns: International Evidence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(1), pages 59-67, January.
- Greene, Myron T. & Fielitz, Bruce D., 1977. "Long-term dependence in common stock returns," Journal of Financial Economics, Elsevier, vol. 4(3), pages 339-349, May.
- Robert J. Elliott & John van der Hoek, 2003. "A General Fractional White Noise Theory And Applications To Finance," Mathematical Finance, Wiley Blackwell, vol. 13(2), pages 301-330.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpfi:0409048. 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: (EconWPA)
If references are entirely missing, you can add them using this form.