Cross-temporal universality of non-linear dependencies in Asian stock markets

Economics Bulletin, 2005, vol. 7, issue 1, 1-6

Abstract: This study utilizes the Hinich portmanteau bicorrelation test in conjunction with the windowed testing procedure to examine the cross-temporal universality of non-linear dependencies in the returns series for Asian stock market indices. As a whole, the detected non-linear dependencies do not appear to be persistent or stable across time for all the stock markets. In particular, the underlying process is of a switching type, with the pure noise process from time to time switches to a non-linear dependent stochastic process for some unknown length of time, and then switches back to pure-noise. This provides a plausible explanation for the disappointing forecasting performance of many non-linear models, as these existing models do not take note of the episodic transient nature of the non-linear dependency structures.

JEL-codes: G1 (search for similar items in EconPapers)
Date: 2005-01-23
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Citations: View citations in EconPapers (11)

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