Are stock returns persistent? Study on Asian stock exchanges

Monika Chopra and Rupish Saldi

Afro-Asian Journal of Finance and Accounting, 2019, vol. 9, issue 2, 141-166

Abstract: The objective of this paper is to examine the existence of persistence effect in the daily (based on five years' daily closing price) and intraday (based on 140 trading days five-minute stock price) returns of five Asian stock exchanges, viz. Nifty, Hang Seng, Nikkei, Shanghai Composite and Jakarta Composite. We find that with five-minute 140 trading days' data, i.e., in the short term, the Indian and Indonesian markets show persistence. In the long term, after accounting for structural breaks, returns do not show persistence in Indian, Chinese and Indonesian exchanges. We conclude that for these exchanges, in the long term, returns may move randomly, thus removing any price prediction possibility. In addition, Japanese stock markets are anti-persistent in both the short term and the long term while Hong Kong showed anti-persistence in long term. Hence, these markets are expected to reward contrarian-trading strategies like short-interest ratio, put-call ratio, open interest, and mutual funds cash position.

Keywords: persistence; long memory; GPH; ARFIMA; Asian exchanges; structural break JEL classification E44; G10. (search for similar items in EconPapers)
Date: 2019
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