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SAD and stock returns revisited: Nonlinear analysis based on MF-DCCA and Granger test

Qingsong Ruan, Manqian Zhang, Dayong Lv and Haiquan Yang

Physica A: Statistical Mechanics and its Applications, 2018, vol. 509, issue C, 1009-1022

Abstract: Using both multifractal detrended fluctuation analysis (MF-DFA) and multifractal detrended cross-correlation analysis (MF-DCCA) methods, this paper examines the effects of seasonal affective disorder (SAD) on stock returns in the Chinese stock market. We first separate stocks into small- and large-cap stocks according to market value, and find that SAD and these two stock-return series are multifractal, based on MF-DFA. Moreover, we employ MF-DCCA and show that the cross-correlation between SAD and stock returns is anti-persistent, and the cross-correlation between SAD and return of small-cap stock is stronger than that between SAD and return of large-cap stock. Furthermore, we find that long-range correlation is the main source of multifractality in the cross-correlations between SAD and small-cap stock, while both long-range correlation and fat tails contribute to the multifractality between SAD and large-cap stock. Finally, utilizing nonlinear Granger Causality test, we find that SAD is the Granger cause of stock returns, not vice versa.

Keywords: SAD; MF-DFA; MF-DCCA; Granger test; Stock returns (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:phsmap:v:509:y:2018:i:c:p:1009-1022