Testing for nonlinearities in German bank stock returns

Sophie Robé and Reinhold Kosfeld ()
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Sophie Robé: Commerzbank, Neue Mainzer Straße 32-36, 60261 Frankfurt am Main, Germany

Empirical Economics, 2001, vol. 26, issue 3, 597 pages

Abstract: In this paper nonlinear structures in German bank stock returns are investigated in a stochastic modelling framework. In the first step we show the existence of a nonlinear return structure by means of the McLeod-Li and the BDS test. In the second step we focus our analysis on the kinds of nonlinearity actually present in bank stock data. On the basis of the Hsieh test it is possible to discriminate with high power additive from multiplicative dependencies to provide guidance for the choice of an adequate class of stochastic models. It is shown that the multiplicative dependencies predominating the bank stock returns can be captured by low order GARCH models.

Keywords: Return; structures; ·; nonlinearity; tests; ·; nonlinear; modelling (search for similar items in EconPapers)
JEL-codes: C12 E44 G14 (search for similar items in EconPapers)
Date: 2001-08-20
Note: received: May 1999/Final version received: October 2000
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Citations: View citations in EconPapers (13)

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