Testing for Predictability in Equity Returns for European Transition Markets

Posted: 11 Apr 2006


This paper presents empirical evidence of short and long-run predictability in stock returns for European transition economies. We employ Variance Ratios with a bootstrap methodology to test for short-run predictability, which is present in most countries. We also estimate Hurst exponents to test for long-range dependence, and find evidence of such. Furthermore, we find evidence of strong time-varying long range dependence in these economies stock returns, which is in line with evidence of multifractality of equity returns.

Keywords: European transition economies, Hurst exponents, Long memory, Predictability, Variance ratio, Multifractality

JEL Classification: G14, G15

Suggested Citation

Tabak, Benjamin M. and Cajueiro, Daniel O., Testing for Predictability in Equity Returns for European Transition Markets. Economic Systems, Vol. 30, No. 1, pp. 56-78, March 2006, Available at SSRN: https://ssrn.com/abstract=895285

Benjamin M. Tabak (Contact Author)

FGV/EPPG ( email )

SGAN Av. L2 Norte - Quadra 602 - Módulos A, B e C
Brasília, Rio de Janeiro 70830-051

Daniel O. Cajueiro

Universidade de Brasília (UnB) ( email )

Campus Universitário Darcy Ribeiro
Asa Norte
Brasília, Distrito Federal 70910-900

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