Testing for Long-Range Dependence in Financial Time Series

Manveer Kaur Mangat () and Erhard Reschenhofer ()
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Manveer Kaur Mangat: University of Vienna
Erhard Reschenhofer: University of Vienna

Central European Journal of Economic Modelling and Econometrics, 2019, vol. 11, issue 2, 93-106

Abstract: Various trading strategies have been proposed that use estimates of the Hurst coefficient, which is an indicator of long-range dependence, for the calculation of buy and sell signals. This paper introduces frequency-domain tests for longrange dependence which do, in contrast to conventional procedures, not assume that the number of used periodogram ordinates grow with the length of the time series. These tests are applied to series of gold price returns and stock index returns in a rolling analysis. The results suggest that there is no long-range dependence, indicating that trading strategies based on fractal dynamics have no sound statistical basis.

Keywords: long-range dependence; fractionally integrated process; frequency domain test; Kolmogorov-Smirnov goodness-of-fit-test (search for similar items in EconPapers)
JEL-codes: C12 C14 C15 C22 C58 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:psc:journl:v:11:y:2019:i:2:p:93-106

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