An Explanation for Persistence in Share Prices and their Associated Returns

Derek Bond and Kenneth A. Dyson

Chapter 6 in Nonlinear Financial Econometrics: Markov Switching Models, Persistence and Nonlinear Cointegration, 2011, pp 124-142 from Palgrave Macmillan

Abstract: Abstract The recent papers by Gil-Alana (2006) and Bond and Dyson (2007) raised the possibility that the time series behavior of share prices, as well as those of returns, could be described by a fractionally integrated process. Inparticular, Bond andDyson (2007) looked at the time domain behavior of individual share price series and found that there was strong evidence that many of the main shares in the Financial Times Stock Exchange 100 Share index (FTSE100) were fractionally integrated. Such findings have important implications for the Efficient Market Hypothesis (EMH); raising the possibility of long-memory and that investors might possibly gain from modeling the time series behavior of the shares. Bond and Dyson (2007), using recent developments in non-linear modeling did, however, raise the possibility that the observed behavior could in some cases be due non-linearities in the series.

Keywords: Share Price; Hurst Exponent; Level Shift; Return Series; Arbitrage Opportunity (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-29521-6_6

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DOI: 10.1057/9780230295216_6

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