Long Memory in the Croatian and Hungarian Stock Market Returns

Zbornik radova Ekonomskog fakulteta u Rijeci, časopis za ekonomsku teoriju i praksu - Proceedings of Rijeka Faculty of Economics, Journal of Economics and Business, Vol. 30, No. 1, 2012, pp. 115-139

25 Pages Posted: 11 May 2013

See all articles by Mejra Festic

Mejra Festic

National Bank of Slovakia

Alenka Kavkler

University of Maribor

Silvo Dajčman

University of Maribor

Date Written: December 19, 2012

Abstract

The objective of this paper is to analyze and compare the fractal structure of the Croatian and Hungarian stock market returns. The presence of long memory components in asset returns provides evidence against the weak-form of stock market efficiency. The starting working hypothesis that there is no long memory in the Croatian and Hungarian stock market returns is tested by applying the Kwiatkowski-Phillips-Schmidt-Shin (KPSS) (1992) test, Lo’s (1991) modified rescaled range (R/S) test, and the wavelet ordinary least squares (WOLS) estimator of Jensen (1999). The research showed that the WOLS estimator may lead to different conclusions regarding long memory presence in the stock returns from the KPSS and unit root tests or Lo’s R/S test. Furthermore, it proved that the fractal structure of individual stock returns may be masked in aggregated stock market returns (i.e. in returns of stock index). The main finding of the paper is that both the Croatian stock index Crobex and individual stocks in this index exhibit long memory. Long memory is identified for some stocks in the Hungarian stock market as well, but not for the stock market index BUX. Based on the results of the long memory tests, it can be concluded that while the Hungarian stock market is weakform efficient, the Croatian stock market is not.

Keywords: stock market, long memory, efficient-market hypothesis

JEL Classification: G14, G15

Suggested Citation

Festic, Mejra and Kavkler, Alenka and Dajčman, Silvo, Long Memory in the Croatian and Hungarian Stock Market Returns (December 19, 2012). Zbornik radova Ekonomskog fakulteta u Rijeci, časopis za ekonomsku teoriju i praksu - Proceedings of Rijeka Faculty of Economics, Journal of Economics and Business, Vol. 30, No. 1, 2012, pp. 115-139, Available at SSRN: https://ssrn.com/abstract=2261687

Mejra Festic (Contact Author)

National Bank of Slovakia ( email )

Imricha Karvasa 1
813 25 Bratislava
Slovakia

Alenka Kavkler

University of Maribor ( email )

2000 Maribor
Slovenia

Silvo Dajčman

University of Maribor ( email )

2000 Maribor
Slovenia

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