The long memory and the transaction cost in financial markets

Li, Daye; Nishimura, Yusaku; Men, Ming

doi:10.1016/j.physa.2015.09.015

Cited by 5 publications

(5 citation statements)

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“…The hypothesis of reversal of the mean, also called negative series correlation, has been interpreted as an efficient correction mechanism in developed markets and a sign of a speculative bubble in emerging financial markets [9]. Nisar and Hanif [10], Mehla and Goya [11], El Khamlichi, Sarkar, Arouri, and Teulon [12], Li, Nishimura, and Men [13], tested the random walk hypotheses in asian markets. Nisar and Hanif [10] show that South Asian stock markets reject the hypothesis of random walk evidencing (in) market efficiency in its weak form.…”

Section: Literature Reviewmentioning

confidence: 99%

“…El Khamlichi, Sarkar, Arouri, and Teulon [12] suggest that Islamic indices have the same level of (in)efficiency as benchmarks but MSCI and FTSE indices are less inefficient. Li, Nishimura, and Men [13] examined the fractal dimensions of 30 stock exchanges from 2006 to 2013, the authors argue that most markets are efficient, under the assumption of non-arbitration.…”

Section: Literature Reviewmentioning

confidence: 99%

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

et al. 2021

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This essay aims to analyze the impact of the 2020 global pandemic on the memory properties of the Eastern Europe stock markets, from the period between 1 January 2016 to 2 September 2020, the sample was divided in two subperiods: 1 January 2016 to 30 August 2019 (before Covid 19) and 2 September 2019 to 2 September 2020 (after Covid 19). To perform this analysis, different approaches were undertaken to analyze whether if: (i) the global pandemic (Covid-19) accentuated the exponents Detrended Fluctuation Analysis (DFA) and the Detrended Cross-Correlation Analysis (𝑝𝐷𝐶𝐶𝐴) in the Eastern European stock markets?. The daily returns do not have normal distributions, they have negative asymmetries, leptocubtic, and also exhibit conditional heteroscedasticity. The exponents Detrended Fluctuation Analysis (DFA), during the Covid-19 period, range from 0.64 to 0.75, showing significant long memories in all markets, except for the SLOVAKIA market (0.45). When we compared the 2 subperiods, we found that 41 pairs of markets have cross-correlation coefficients without trend ( λDCCA) strong (out of 45 possible), and 4 pairs of markets decreased the 𝑟ℎ𝑜𝐷𝐶𝐶𝐴 in particular the markets ESTONIA-SLOVAKIA, LITHUANIA-SLOVAKIA, HUNGARY-SLOVAKIA, POLAND-SLOVAKIA. These findings show that the assumption of the market efficiency hypothesis may be in question, since the prediction of market movement can be improved if we consider the out-of-lag movements of the other markets, enabling the occurrence of arbitrage operations and some difficulties in portfolio diversification.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

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

et al. 2021

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“…Since Mandelbrot proposed the fractal theory in 1983 [8], the fractal features of financial time series have brought a new way to study the stock markets. Lots of researchers have already found fractal not only exists in stock markets [9,10,11], but also in other aspects, such as earthquake frequencies [12], rate of traffic flow [13] and heart rate [14].…”

Section: Introductionmentioning

confidence: 99%

“…Sun et al [10] indicated that strong correlation exists between the variation of return and the parameters of the multifractal spectra in Hong Kong market and concluded that multi-fractal analysis can be used to predict the variation of stock price with a high precision. In addition, Li et al [9] investigated the fractal dimensions of 30 important stock markets and proposed a model to achieve the considerable profits from the predictable long-term memory. In obvious, to mine the fractal features of stock could be helpful to predict stock price variation and then guide the stock trade for profit.…”

Section: Introductionmentioning

confidence: 99%

FAT: A Fractal-Assisted Technical Trade Method in Stock Markets

Chao¹,

Zhai²,

Zhang³

2019

dtem

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Aiming at improving the accuracy of technical forecast in investment, we proposed a technical trade method assisted by the fractal evolution features of share price, called FAT. This paper first presented a Fractal Quantitative Index (FQI) to control the trade triggered by technical indicators such as Moving Average Convergence/Divergence (MACD), Price Rate of Change (ROC) and Relative Strength Index (RSI). The FQI of a stock is extracted from its price volatility in a certain period of time, and then FAT can make a decision on whether to trade, guided by the state of FQIs of different timescale. With the help of FQI, FAT provided a mechanism to detect and filter out some trading signals that may be noise, in order to control the cost of frequently trading. The experimental results showed that FAT can improve the success probability of trade based on some technical indicators widely used in financial time series. In our conclusion, FAT is a promising technology trading risk control tool worth a deep study.

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“…Há que se considerar, no entanto, que custos de transação aumentam a ineficiência de mercado e se apresentam como justificativa plausível para inibir a ação de arbitradores, conforme constatado porLi et al (2016). 9 "Still, the efficient markets theorists often greet the disappearance of small firm and similar effects as proof that markets are ultimately efficient.…”

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Mercado adaptativo e previsibilidade de retornos: evidências do mercado acionário brasileiro

Oliveira Filho

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The long memory and the transaction cost in financial markets

Cited by 5 publications

References 46 publications

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

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

FAT: A Fractal-Assisted Technical Trade Method in Stock Markets

Mercado adaptativo e previsibilidade de retornos: evidências do mercado acionário brasileiro

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