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Chaos in German stock returns — New evidence from the 0–1 test

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  • Webel, Karsten

Abstract

This paper applies the 0–1 test for chaos to returns from the German stock market, providing empirical evidence of chaotic structures in the returns of all DAX members. For noise reduction purposes, wavelet denoising is employed prior to the application of the 0–1 test.

Suggested Citation

  • Webel, Karsten, 2012. "Chaos in German stock returns — New evidence from the 0–1 test," Economics Letters, Elsevier, vol. 115(3), pages 487-489.
    • Handle: RePEc:eee:ecolet:v:115:y:2012:i:3:p:487-489
    DOI: 10.1016/j.econlet.2011.12.110
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    References listed on IDEAS

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    1. Alfarano, Simone & Lux, Thomas, 2007. "A Noise Trader Model As A Generator Of Apparent Financial Power Laws And Long Memory," Macroeconomic Dynamics, Cambridge University Press, vol. 11(S1), pages 80-101, November.
    2. William A. Brock & Cars H. Hommes, 1997. "A Rational Route to Randomness," Econometrica, Econometric Society, vol. 65(5), pages 1059-1096, September.
    3. William A. Brock & Cars H. Hommes, 2001. "A Rational Route to Randomness," Chapters, in: W. D. Dechert (ed.), Growth Theory, Nonlinear Dynamics and Economic Modelling, chapter 16, pages 402-438, Edward Elgar Publishing.
    4. Small Michael & Tse Chi K., 2003. "Determinism in Financial Time Series," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 7(3), pages 1-31, October.
    5. Hsieh, David A, 1991. "Chaos and Nonlinear Dynamics: Application to Financial Markets," Journal of Finance, American Finance Association, vol. 46(5), pages 1839-1877, December.
    6. Resende, Marcelo & Zeidan, Rodrigo M., 2008. "Expectations and chaotic dynamics: Empirical evidence on exchange rates," Economics Letters, Elsevier, vol. 99(1), pages 33-35, April.
    7. Apostolos Serletis & Periklis Gogas, 2000. "Purchasing power parity, nonlinearity and chaos," Applied Financial Economics, Taylor & Francis Journals, vol. 10(6), pages 615-622.
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    Cited by:

    1. Tiwari, Aviral Kumar & Gupta, Rangan, 2019. "Chaos in G7 stock markets using over one century of data: A note," Research in International Business and Finance, Elsevier, vol. 47(C), pages 304-310.
    2. Ayşe İşi & Fatih Çemrek, 2019. "Comparison of the Global, Local and Semi-Local Chaotic Prediction Methods for Stock Markets: The Case of FTSE-100 Index," Alphanumeric Journal, Bahadir Fatih Yildirim, vol. 7(2), pages 289-300, December.
    3. Claudiu Tiberiu Albulescu & Aviral Kumar Tiwari & Phouphet Kyophilavong, 2021. "Nonlinearities and Chaos: A New Analysis of CEE Stock Markets," Mathematics, MDPI, vol. 9(7), pages 1-13, March.
    4. Xu, Kaiye & Shang, Pengjian & Feng, Guochen, 2015. "Multifractal time series analysis using the improved 0–1 test model," Chaos, Solitons & Fractals, Elsevier, vol. 70(C), pages 134-143.

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    More about this item

    Keywords

    0–1 test; Chaos; Stock returns; Wavelet denoising;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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