Persistence, Non-Linearities and Structural Breaks in European Stock Market Indices

29 Pages Posted: 25 Jul 2019

See all articles by Guglielmo Maria Caporale

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance; London South Bank University; CESifo (Center for Economic Studies and Ifo Institute); German Institute for Economic Research (DIW Berlin)

Luis A. Gil-Alana

University of Navarra - Department of Economics

Carlos Poza

Universidad Francisco de Vitoria

Date Written: 2019

Abstract

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

Suggested Citation

Caporale, Guglielmo Maria and Gil-Alana, Luis A. and Poza, Carlos, Persistence, Non-Linearities and Structural Breaks in European Stock Market Indices (2019). CESifo Working Paper No. 7667, Available at SSRN: https://ssrn.com/abstract=3422249

Guglielmo Maria Caporale (Contact Author)

Brunel University London - Department of Economics and Finance ( email )

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HOME PAGE: http://www.brunel.ac.uk/about/acad/bbs/bbsstaff/ef_staff/guglielmocaporale/

London South Bank University ( email )

Centre for Monetary and Financial Economics
London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Luis A. Gil-Alana

University of Navarra - Department of Economics ( email )

Campus de Arrosadia
Pamplona, 31006
Spain

Carlos Poza

Universidad Francisco de Vitoria ( email )

Madrid
Spain

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