Long memory in stock returns: Evidence from the Eastern European markets

Dias, Rui; Heliodoro, Paula; Alexandre, Paulo; Santos, Hortense; Farinha, Ana

doi:10.1051/shsconf/20219101029

Cited by 15 publications

(12 citation statements)

References 23 publications

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“…The results are in line with the findings of the authors G.Sudha and V. Sornaganesh (2020), Lahmiri and Bekiros (2020), which indicate sharp declines in the international financial markets, resulting from the global pandemic . These findings are corroborated by authors Heliodoro, Dias, and Alexandre (2020), Dias, Heliodoro, Alexandre, and Vasco (2020), Dias, Heliodoro, Alexandre, Santos, and Farinha (2021, Dias and Pereira (2021) who evidence stock market crashes in the first quarter of 2020 due to the 2020 global pandemic. Source: Own elaboration.…”

Section: Resultssupporting

confidence: 58%

The Impact of Covid-19 on the Securities and Equity Markets of Portugal and Edp: An Econophysics Approach

Manuel¹,

Heliodoro²,

Dias³

et al. 2020

LIMEN - International Scientific-Business Conference - Leadership, Innovation, Management and Economics: Integrated Politics Of

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The Efficient Market Hypothesis (EMH), is one of the most important hypotheses in the financial economy, which argues that yields have no memory (correlation), which implies that agents cannot have abnormal returns in the financial markets, base arbitration operations. This essay intends to investigate the efficiency, in its weak form, in the stock and bond markets of Portugal and EDP, in the period from December 31, 2019, to August 10, 2020. With the purpose of achieving such an analysis, whether: (i) with the evolution of the global pandemic (Covid-19) the Portuguese and EDP stock and bond markets show signs of (in) efficiency? (ii) Does the increased integration between the Portuguese and EDP stock and bond markets result in risk transmission? The model 𝐷𝐹𝐴 shows the existence of long memories in these markets, suggesting that they are not efficient, which validates the first research question. This situation has implications for investors, since some returns can be expected, creating opportunities for arbitrage and abnormal earnings. However, to confirm the inefficiency of these markets, based on our results, we must prove the existence of anomalous returns. In order to answer the second investigation question, we carried out the integration test that shows that these markets are mostly integrated. To validate whether financial integration results in risk transmission between the analyzed markets, we estimate the trendless cross-correlation coefficients (𝜆𝐷𝐶𝐶𝐴), which shows 4 pairs of markets showing risk transmission (4 out of 10 possible). In conclusion, the authors suggest that these results are of interest, among others, to international investors interested in expanding the geographical scope, regarding the implementation of portfolio diversification strategies.

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Section: Resultssupporting

confidence: 58%

The Impact of Covid-19 on the Securities and Equity Markets of Portugal and Edp: An Econophysics Approach

Manuel¹,

Heliodoro²,

Dias³

et al. 2020

LIMEN - International Scientific-Business Conference - Leadership, Innovation, Management and Economics: Integrated Politics Of

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“…The lack of consensus among economists and financial analysts regarding market efficiency requires the study of the efficient market hypothesis (EMH). Another significant reason to study market efficiency is the role of stock markets to act as financial intermediaries between the saver and the borrower in the distribution of scarce resources via the price mechanism (Dias, da Silva, and Dionísio, 2019;Dias et al, 2021;Dias, Heliodoro, Teixeira, et al, 2020;Dias, Teixeira, Machova, et al, 2020;Jain, 2020;Karasiński, 2020) The authors Obayagbona and Igbinosa (2015), Kelikume (2016), Abakah, Alagidede, Mensah, and Ohene-Asare ( 2018), Hawaldar, Rohith, and Pinto (2020) analyzed market efficiency, in its weak form, in the African stock indexes. Obayagbona and Igbinosa (2015) tested the Nigerian market in the context of market efficiency, the authors show that the price series do not show randomness, that is, they present long memories.…”

Section: Literature Reviewmentioning

confidence: 99%

Random Walks and Market Efficiency Tests: Evidence for Us and African Capital Markets

Dias¹,

Santos²,

Alexandre³

et al. 2021

International Scientific Conference EMAN – Economics and Management: How to Cope With Disrupted Times

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The 2020 Russia-Saudi Oil Price War was an economic war triggered in March 2020 by Saudi Arabia in response to Russia’s refusal to reduce oil production to keep oil prices at a moderate level. This economic conflict resulted in a sharp drop in the price of oil in 2020, as well as crashes in international markets. In the light of these events, our aim was to test the efficient market hypothesis, in its weak form, in the stock markets of Botswana (BSE), Egypt (EGX 100), Kenya (NSE 20), Moroccan All Shares (MASI), Tunisia (Tunindex), and the MARKET of the USA (DOWJONES INDUSTRIALS), in the period of Septem¬ber 2, 2019 to January 11, 2021. The results therefore support the evidence that the random walk hypoth¬esis is not supported by the financial markets analyzed in this period of global pandemic. The values of variance ratios are lower than the unit, which implies that the yields are autocorrelated in time and, there is reversal to the mean. In order to validate the results, we estimate the model αDFA that shows that the stock markets NSE 20 (0.75), TUNINDEX (0.69), MASI (0.63), EGX 100 (0.64), BSE (0.61), DOW JONES (0.58) show autocorrelation in their profitability, that is, these markets show signs of (in) efficiency, in its weak form, persistence in profitability, validating the results of the variance test by Rankings and Wright Signs. In conclusion we can show that the U.S. stock market has more market efficiency when compared to the African stock markets analyzed. The authors consider that the results achieved are of interest to investors looking for opportunities for portfolio diversification in these regional stock markets.

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“…The DFA has the following interpretation: 0 < < 0,5: anti-persistent series; = 0,5 series has a random walk; 0,5 < < 1 persistent series. The function of this technique is to examine the relationship between the and + values at different times (Guedes et al, 2018;Dionísio, 2019 Alexandre, Dias, andDias, Heliodoro, Alexandre, Santos, and Farinha, 2021;Dias, Heliodoro, and Alexandre, 2020;Dias, Heliodoro, Alexandre, and Vasco, 2020;Dias, Pardal, Teixeira, and Machová, 2020 Zebende ( 2011) non-trend cross-correlation coefficient is a method for quantifying the level of cross-correlation between two nonstationary time series. The coefficient is based on the DFA (Peng et al, 1994) and DCCA (Podobnik and Stanley, 2008) methods.…”

Section: Modelmentioning

confidence: 99%

“…If a given stock market is strongly linked to the stock market of another country, the financial stability of the former depends, in part, on the financial stability of the latter. For this reason, a close or strong link between markets increases levels of vulnerability to external shocks and, as a result, influences the economic conditions and welfare levels of the respective countries, as well as the efficiency of the market itself Heliodoro, 2020a, 2020b;Alexandre, Heliodoro, and Dias, 2019;Dias and Carvalho, 2020;Alexandre, 2020a, 2019;Dias, Heliodoro, Alexandre, Santos, and Farinha, 2021;Dias, Heliodoro, Teixeira, and Godinho, 2020;Dias, Pardal, Teixeira, and Machová, 2020;Dias, Heliodoro, Alexandre, and Vasco, 2020b;Dias and Pereira, 2021; Heliodoro, P., Dias, R., Alexandre, P., and Vasco, 2020;Pardal, P., Dias, R., Šuleř, P., Teixeira, N., and Krulický, 2020;Santos and Dias, 2020).…”

Section: Introductionmentioning

confidence: 99%

Risk Diversification in Asean-5 Financial Markets: An Empirical Analysis in the Context of the Global Pandemic (Covid-19)

Silva¹,

Dias²,

Heliodoro³

et al. 2020

LIMEN - International Scientific-Business Conference - Leadership, Innovation, Management and Economics: Integrated Politics Of

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The World Health Organization (WHO) has designated the new coronavirus infection as a global pandemic, based on the risk of contagion, and the number of confirmed cases in more than 195 countries. COVID-19 has an intense impact on the global economy, resulting from uncertainty and pessimism, with adverse effects on financial markets. Due to these events, this essay aims to estimate if the portfolio’s diversification is feasible in the financial markets of Indonesia, Malaysia, Philippines, Singapore, and Thailand (ASEAN-5), in the context of the global pandemic (Covid-19), regarding the period of July 1, 2019, to July 22, 2020. To achieve such an analysis, is intended to provide answers for two questions, namely: i) the global pandemic (Covid-19) has accentuated financial integration between the ASEAN-5 markets? ii) If so, can the persistence of returns affect the risk diversification of portfolios? The results obtained suggest that those regional markets present accentuated levels of integration. However, the Singapore's stock market index does not show any level of integration, indicating that the implementation of portfolio’s diversification strategies can be considered; however, the same can no longer be evident for the other ASEAN-5 markets. Additionally, we verified that the ASEAN-5 markets indicate persistence in returns, that is, the presence of accentuated long memories, except for the Singapore market (SGX). These findings show that prices do not fully reflect the information available and that changes in prices are not independent and identically distributed. This situation is found for investors, since some returns can be expected, creating opportunities for arbitrage and abnormal earnings. Corroborating the trendless cross-correlation coefficients (𝜆𝐷𝐶𝐶𝐴), proven evidence coefficients, mostly, suggest the existence of risk transmission between markets. In conclusion, the authors seek that the implementation of an efficient diversification strategy for portfolios requires agreement with the controversial application. These conclusions also open space for the regulators of these regional markets to take measures to ensure better information between these markets and international markets.

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Long memory in stock returns: Evidence from the Eastern European markets

Cited by 15 publications

References 23 publications

The Impact of Covid-19 on the Securities and Equity Markets of Portugal and Edp: An Econophysics Approach

The Impact of Covid-19 on the Securities and Equity Markets of Portugal and Edp: An Econophysics Approach

Random Walks and Market Efficiency Tests: Evidence for Us and African Capital Markets

Risk Diversification in Asean-5 Financial Markets: An Empirical Analysis in the Context of the Global Pandemic (Covid-19)

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