Testing Long Memory in Stock Returns of Emerging Markets: Some Further Evidence

Economics, Management, and Financial Markets, Vol. 6, No. 3, pp. 136–147, 2011

12 Pages Posted: 2 May 2012

See all articles by Gourishankar S. Hiremath

Gourishankar S. Hiremath

Indian Institute of Technology (IIT), Kharagpur - Department of Humanities and Social Sciences

Bandi Kamaiah

University of Hyderabad

Date Written: May 2, 2012

Abstract

The purpose of this paper is to examine the issue of long memory stock returns of emerging markets. The study carries out a biased reduced semi parametric test to detect long memory in mean process. The results suggest no strong evidence of long memory in mean process of stock returns both in emerging and developed markets. The results are in contrast with earlier studies, which conclude that emerging markets in general characterized by long memory process. Hence, long memory is not a peculiar characteristic of emerging markets but appear to be stylized fact of asset returns irrespective of stage of development of the market. The test results are reliable and preferable to other test of long memory as it reduces bias in the estimation. The results suggest that short memory forecasting methods are relevant for predicting the future returns.

Keywords: long memory, volatility persistence, mean-reversion, semi-parametric test, hyperbolic decay, market efficiency, emerging markets, BSE, NSE, Indian stock market

JEL Classification: G14, C14, C58

Suggested Citation

Hiremath, Gourishankar S. and Kamaiah, Bandi, Testing Long Memory in Stock Returns of Emerging Markets: Some Further Evidence (May 2, 2012). Economics, Management, and Financial Markets, Vol. 6, No. 3, pp. 136–147, 2011, Available at SSRN: https://ssrn.com/abstract=2049781

Gourishankar S. Hiremath (Contact Author)

Indian Institute of Technology (IIT), Kharagpur - Department of Humanities and Social Sciences ( email )

Kharagpur, West Bengal 721302
India

Bandi Kamaiah

University of Hyderabad ( email )

Central University (PO)
Andhra Pradesh
Hyderabad, CA 500 046
India

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
73
Abstract Views
647
rank
444,780
PlumX Metrics