Dual Long Memory in Stock Market Prices: New Evidence Based on Bull and Bear Markets

Siow-Hooi Tan, Hway-Boon Ong and Roy W. L. Khong ()

The IUP Journal of Applied Economics, 2013, vol. XII, issue 3, 38-55

Abstract: This study examines the dual long memory properties in Malaysian stock market during bull and bear periods for the period 1993:10 to 2009:12. Both semi-parametric and ARFIMA-FIGARCH models are applied for the diagnosis of long memory. The study finds no evidence of long memory for stock returns. On the contrary, the long memory in stock volatility for all the bear periods and three of the bull periods is supported. Besides, the long-range dependence is more persistent in the early years of the sample, in particular, prior to the imposition of capital controls by the Malaysian government in September 1998. The presence of long memory in volatility provides evidence against the efficient market hypothesis and thus offers arbitrage opportunities to reap excess profits in stock market.

Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjae:v:12:y:2013:i:3:p:38-55

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