Modeling long-term memory effect in stock prices: A comparative analysis with GPH test and Daubechies wavelets

Alper Ozun () and Atilla Cifter ()

Studies in Economics and Finance, 2008, vol. 25, issue 1, pages 38-48

Abstract: Purpose – This paper, using Turkish stock index data, set outs to present long-term memory effect using chaotic and conventional unit root tests and investigate if chaotic technique as wavelets captures long-memory better than conventional techniques. Design/methodology/approach – Haar and Daubechies as wavelet-based OLS estimator and GPH and other classical models are applied in order to investigate the performance of long memory in the time series. Findings – The results indicate that Daubechies wavelet analysis provide the accurate determination for long memory where conventional techniques does not. Originality/value – The research results have both methodological and practical originality. On the theoretical side, the wavelet-based OLS estimator is superior in modeling the behaviours of the stock returns in emerging markets where non-linearities and high volatility exist due to their chaotic natures. For practical aims, on the other hand, the results show that the Istanbul Stock Exchange is not in the weak-form efficient because the prices have memories that are not reflected in the prices, yet.

Keywords: Economic cycles; Emerging markets; Stock prices; Turkey (search for similar items in EconPapers)
Date: 2008

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Working Paper: Modeling Long-Term Memory Effect in Stock Prices: A Comparative Analysis with GPH Test and Daubechies Wavelets (2007)
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