Preliminary communication

LONG MEMORY IN EASTERN EUROPEAN FINANCIAL MARKETS RETURNS

ALINA-NICOLETA RADU

Abstract

The paper examines the long
memory property of stock returns
and its implications using daily
index returns for eight CEE
emerging markets: Romania, Hungary,
Czech Republic, Poland, Slovenia,
Bulgaria, Slovakia, and Croatia. Several
nonparametric methods for testing for
long memory are employed, as well as
parametric long memory models. The
ARFIMA-FIGARCH model seems the
most appropriate specification since the
nonlinearity tests can not reject the null
of independent and identically distributed
residuals, implying that this specification
accounts for the nonlinearity in the data.
The estimated fractional differencing
parameter is statistically significant in seven
of the eight emerging economies employed
in the study, suggesting the presence of long
memory in the returns in these financial
markets.

Keywords

long memory; ARFIMA; FIGARCH; nonlinearity; emerging markets

Hrčak ID:

86641

URI

https://hrcak.srce.hr/86641

Publication date:

15.6.2012.

Article data in other languages: croatian

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