Nonlinear Dynamics in Real-Time Equity Market Indices: Evidence from the United Kingdom
Laurence Copeland () and
Woon Wong ()
Economic Journal, 1995, vol. 105, issue 431, 864-80
This paper tests for the presence of nonlinear dependence and chaos in real-time returns on the U.K. FTSE-100 Index using a six-month sample of about 60,000 observations. Since there is clear evidence of nonlinearity, the authors follow other researchers in this field by applying the same tests to the residuals from a GARCH process fitted to the data in order to find out whether or not the nonlinearity can be explained by this type of model. In the event, their results suggest that GARCH can explain some but not all of the observed nonlinear dependence. Copyright 1995 by Royal Economic Society.
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