EconPapers    
Economics at your fingertips  
 

The Search for Chaos and Nonlinearities in Swedish Stock Index Returns

Henrik Amilon () and Hans Byström
Additional contact information
Henrik Amilon: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

No 1998:6, Working Papers from Lund University, Department of Economics

Abstract: Numerous empirical studies have shown evidence of nonlinearities in financial time series, which can be of both a deterministic and a stochastic nature. Chaos is an example of the former, and heteroscedasticity in the conditional variance an example of the latter. We apply a test, the BDS test, to Swedish Stock Index returns and detect large deviations from the IID-hypothesis. There is no evidence of chaos, and most of the nonlinearities are due to conditionally heteroscedastic error terms. We look at monthly, daily, and 15-minute return series, and find no sensitivity in the results to choice of sampling frequency. Different GARCH models often seem to explain the nonlinearities detected by the BDS test, which is particularly the case for GARCH models with t-distributed errors fitted to monthly and daily returns.

Keywords: BDS test; neural networks; heteroscedasticity; deterministic systems (search for similar items in EconPapers)
JEL-codes: C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ets, nep-fin and nep-fmk
Date: 1998-12-01
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://swopec.hhs.se/lunewp/papers/lunewp1998_006.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:lunewp:1998_006

Access Statistics for this paper

More papers in Working Papers from Lund University, Department of Economics Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by David Edgerton ().

 
Page updated 2019-09-23
Handle: RePEc:hhs:lunewp:1998_006