An empirical analysis on the degree of Gaussianity and long memory of financial returns in emerging economies

Pernagallo, Giuseppe; Torrisi, Benedetto

doi:10.1016/j.physa.2019.121296

Cited by 18 publications

(10 citation statements)

References 23 publications

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“…The rejection of the null hypothesis, i.i.d., can be explained, among other factors, by the existence of autocorrelation or by the existence of heteroscedasticity in the stock market index series, in which case the rejection of the null hypothesis is explained by non-linear dependence on the data. These results are in line with the studies of the authors Ferreira and Dionísio (2016), Aggarwal (2018), Pernagallo and Torrisi (2019), which evidence the existence of persistence and memories in the stock market indices. In order to estimate the occurrence of financial contagion between the financial markets of the LAC Region and the U.S., the unconditional correlations were estimated, and the statistical significance examined.…”

Section: Source: Own Elaborationsupporting

confidence: 92%

Financial Contagion Between the Us and Emerging Markets: Covid-19 Pandemic Case

Heliodoro¹,

Dias²,

Alexandre³

2020

International Scientific Conference EMAN – Economics &Amp; Management: How to Cope With Disrupted Times

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To realise how crises are disseminated is relevant for policy makers and regulators in order to take appropriate measures to prevent or contain the propagation of crises. This study aims to analysis the financial contagion in the six main markets of Latin America (Argentina, Brazil, Chile, Colombia, Mexico and Peru) and the USA, in the period 2015-2020. Different approaches have been undertaken to carry out this analysis in order to consider the following research question, namely whether: (i) the global pandemic covid19 has accentuated the contagion between Latin American financial markets and the US? The results of the autocorrelation tests are totally coincident with those obtained by the BDS test. The rejection of the null hypothesis, i.i.d., can be explained, among other factors, by the existence of autocorrelation or by the existence of heteroscedasticity in the stock market index series, in which case the rejection of the null hypothesis is explained by non-linear dependence on data, with the exception of the Argentine market. However, significant levels of contagion were expected to occur between these regional markets and the US as a result of the global pandemic (Covid-19), which did not happen. These results may indicate the implementation of efficient diversification strategies. The authors consider that the results achieved are relevance for investors who seek opportunities in these stock markets, as well as for policy makers to carry out institutional reforms in order to increase the efficiency of stock markets and promote the sustainable growth of financial markets.

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Section: Source: Own Elaborationsupporting

confidence: 92%

Financial Contagion Between the Us and Emerging Markets: Covid-19 Pandemic Case

Heliodoro¹,

Dias²,

Alexandre³

2020

International Scientific Conference EMAN – Economics &Amp; Management: How to Cope With Disrupted Times

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“…The rejection of the null hypothesis, i.i.d., can be explained, among other factors, by the existence of autocorrelation or by the existence of heteroscedasticity in the series of scholarship indices, cases in which the rejection of the null hypothesis is explained by nonlinear dependence on the data. These results are in line with studies by the authors Pernagallo and Torrisi (2019) that show the existence of persistence in the profitability of financial markets.…”

Section: Source: Own Elaborationsupporting

confidence: 93%

Testing the Empirics of Weak Form of Efficient Market Hypothesis: Evidence From Lac Region Markets

Santos¹,

Dias²,

Heliodoro³

et al. 2020

Fourth International Scientific Conference ITEMA Recent Advances in Information Technology, Tourism, Economics, Management and

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The new coronavirus disease (Covid-19) evolved quickly from a regional health outbreak to a global collapse, stopping the global economy in a unprecedented way, creating uncertainty and chaos in the financial markets. Based on these events, it is intended in this paper to test the persistence of profitability in the financial markets of Argentina, Brazil, Chile, Colombia, Peru and Mexico, in the period between January 2018 to July 2020. In order to perform this analysis where undertaken different approaches in order to analyze if: (i) the financial markets of Latin America are efficient in their weak-form during the global pandemic (Covid-19)? ii) If so, the persistent long memories cause risks between these regional markets? The results suggest that the returns don’t follow the i.i.d. hypothesis, from dimension 2, reinforcing the idea that returns of stock indexes have a non-linear nature or a significant non-linear component, exception made to the Argentina market, which was expected in virtue of the Ljung-Box (with the return squares) test results, and ARCH-LM. Corroborating the exponents Detrended Fluctuation Analysis (DFA), indicate the presence of persistent long memories, namely into the following markets: Colombia (0.72), Chile (0.66), Brazil (0.58) and Peru (0.57). The Argentina market does not reject the random walk hypothesis, while the Mexican market suggests some anti-persistence (0.41). This situation has implications for investors, once that some returns can be expected, creating arbitration opportunities and abnormal income, contrary to the supposed from the random walk hypothesis and information efficiency. The t-test results of the heteroscedasticity form the two samples suggest that there is no risk transmission between these regional markets, with the exception to the BOVESPA / BOLSAA MX markets, that is, the existence of persistent long memories in the returns does not imply the risk transmission between markets. These finds allow the creation of strategies of diversification inefficient portfolios. These conclusions also open space for the market regulators to implement measures that guarantee a better informational information of these regional markets.

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“…Ngene, Tah, and Darrat [14], Ali, Shahzad, Raza, and Al-Yahyaee [15], Pernagallo and Torrisi [16] investigated whether international markets follow the random walk hypothesis. Ngene, Tah, and Darrat [14] examined 18 emerging markets in the presence of multiple unscheduled and successive structural breakdowns.…”

Section: Literature Reviewmentioning

confidence: 99%

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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An empirical analysis on the degree of Gaussianity and long memory of financial returns in emerging economies

Cited by 18 publications

References 23 publications

Financial Contagion Between the Us and Emerging Markets: Covid-19 Pandemic Case

Financial Contagion Between the Us and Emerging Markets: Covid-19 Pandemic Case

Testing the Empirics of Weak Form of Efficient Market Hypothesis: Evidence From Lac Region Markets

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

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