Persistence, Non-Linearities and Structural Breaks in European Stock Market Indices
29 Pages Posted: 25 Jul 2019
Date Written: 2019
This paper examines persistence, structural breaks and non-linearities in the case of five European stock market indices, namely the FTSE100 (UK), DAX30 (Germany), CAC40 (France), IBEX35 (Spain) and FTSE MIB40 (Italy), using fractional integration methods. The empirical results provide no evidence of non-linearities in either prices or returns; the former are found to exhibit unit roots and the latter to be I(0) in most cases. Further, between 2 and 4 structural breaks are found for each of the return series, and mean reversion in some subsamples.
Keywords: European stock markets, nonstationarity, unit roots, fractional integration, persistence, non-linearities
JEL Classification: C220, C580
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