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On fractional integrating dynamics in the US stock market

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  • Elder, John
  • Serletis, Apostolos

Abstract

This paper extends the work in [Serletis Apostolos, Shintani Mototsugu. No Evidence of Chaos but Some Evidence of Dependence in the US Stock Market. Chaos, Solitons & Fractals 2003;17:449–54] by re-examining the empirical evidence for random walk type behavior in the US stock market, using daily observations on the Dow Jones industrial average (from January 3, 1928 to March 15, 2006). In doing so, it tests for fractional integrating dynamics utilizing a new semiparametric wavelet-based estimator. We find no evidence of fractional integration and cannot reject the null hypothesis that the return process is integrated of order zero, meaning that the (log) price process contains a unit root (with drift).

Suggested Citation

  • Elder, John & Serletis, Apostolos, 2007. "On fractional integrating dynamics in the US stock market," Chaos, Solitons & Fractals, Elsevier, vol. 34(3), pages 777-781.
    • Handle: RePEc:eee:chsofr:v:34:y:2007:i:3:p:777-781
    DOI: 10.1016/j.chaos.2006.04.004
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    References listed on IDEAS

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    1. Sowell, Fallaw, 1992. "Maximum likelihood estimation of stationary univariate fractionally integrated time series models," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 165-188.
    2. Mark J. Jensen, 1997. "Using Wavelets to Obtain a Consistent Ordinary Least Squares Estimator of the Long Memory Parameter," Econometrics 9710002, University Library of Munich, Germany.
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    Cited by:

    1. Koustas, Zisimos & Lamarche, Jean-François & Serletis, Apostolos, 2008. "Threshold random walks in the US stock market," Chaos, Solitons & Fractals, Elsevier, vol. 37(1), pages 43-48.
    2. Bhandari, Avishek, 2020. "Long Memory and Correlation Structures of Select Stock Returns Using Novel Wavelet and Fractal Connectivity Networks," MPRA Paper 101946, University Library of Munich, Germany.
    3. Avishek Bhandari & Bandi Kamaiah, 2021. "Long Memory and Fractality Among Global Equity Markets: a Multivariate Wavelet Approach," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 19(1), pages 23-37, March.
    4. Cajueiro, Daniel O. & Tabak, Benjamin M., 2009. "Testing for long-range dependence in the Brazilian term structure of interest rates," Chaos, Solitons & Fractals, Elsevier, vol. 40(4), pages 1559-1573.
    5. Xu, Beibei & Chen, Diyi & Zhang, Hao & Wang, Feifei, 2015. "Modeling and stability analysis of a fractional-order Francis hydro-turbine governing system," Chaos, Solitons & Fractals, Elsevier, vol. 75(C), pages 50-61.
    6. Cevik, Emrah Ismail, 2012. "İstanbul Menkul Kıymetler Borsası’nda etkin piyasa hipotezinin uzun hafıza modelleri ile analizi: sektörel bazda bir inceleme [The testing of efficient market hypothesis in the Istanbul Stock Excha," MPRA Paper 71484, University Library of Munich, Germany, revised 2012.
    7. Serletis, Apostolos & Rosenberg, Aryeh Adam, 2009. "Mean reversion in the US stock market," Chaos, Solitons & Fractals, Elsevier, vol. 40(4), pages 2007-2015.
    8. Hinich, Melvin J. & Serletis, Apostolos, 2008. "Randomly modulated periodicity in the US stock market," Chaos, Solitons & Fractals, Elsevier, vol. 36(3), pages 654-659.

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