Non-Linearity of Returns in the Listed ADRs
20 Pages Posted: 18 Jan 2010
Date Written: January 14, 2010
Traditionally Linear models dominate the finance literature. The models assume that time series of stock returns (daily, monthly etc.) follow a liner process and can be well approximated by the use of linear models. But this assumption has its own limitations as recent researches indicate that stock returns do not follow linearity at a regular basis. Massive work has been done in reporting the nonlinearity in stock returns across different markets and economies which shows that empirically nonlinearity can be established. In the present study we have analyzed a sample of Indian ADR’s for possible existence of nonlinearity in ADRs listed in American exchanges as it provides practical implications to the investors and policy makers.
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