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Long-Term Memory in Stock Market Prices
Open accessAbstract
A test for long-run memory that is robust to short-range dependence is developed. It is a simple extension of Mandelbrot's "range over standard deviation" or R/S statistic, for which the relevant asymptotic sampling theory is derived via functional central limit theory. This test is applied to daily, weekly, monthly, and annual stock returns indexes over several different time periods. Contrary to previous findings, there is no evidence of long-range dependence in any of the indexes over any sample period or sub-period once short-term autocorrelations are taken into account. Illustrative Monte Carlo experiments indicate that the modified R/S test has power against at least two specific models of long-run memory, suggesting that stochastic models of short-range dependence may adequately capture the time series behavior of stock returns.
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Cited by
Modeling and pricing long memory in stock market volatility
Bollerslev, T., & Ole Mikkelsen, H. (1996) · Journal of Econometrics · doi:10.1016/0304-4076(95)01736-4 · Cited by 1,208
Random matrix approach to cross correlations in financial data
Plerou, V., Gopikrishnan, P., Rosenow, B., Amaral, L. A. N., Guhr, T., & Stanley, H. E. (2002) · Physical Review E · doi:10.1103/physreve.65.066126 · Cited by 936
The econometrics of financial markets
Pagan, A. (1996) · Journal of Empirical Finance · doi:10.1016/0927-5398(95)00020-8 · Cited by 873
A simple multiple variance ratio test
Chow, K. V., & Denning, K. C. (1993) · Journal of Econometrics · doi:10.1016/0304-4076(93)90051-6 · Cited by 494
The evolution of stock market efficiency over time: A survey of the empirical literature
Lim, K.-P., & Brooks, R. (2011) · Journal of Economic Surveys · doi:10.1111/j.1467-6419.2009.00611.x · Cited by 410
Metadata
- Authors
- Lo, A. W.
- Venue
- Econometrica
- Publisher
- JSTOR
- Published
- 1991-09
- Volume
- 59
- Issue
- 5
- Pages
- 1279
- ISSN
- 0012-9682 (ISSN-L)
- OpenAlex
- W1552362148
- Cited by
- 1,710
- References
- 0
- FWCI
- 28.84
- Type
- journal article
- Language
- en
- Open access
- green
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