A Long-Memory Property of Stock Market Returns and a New Model-英文文献.pdfVIP

Journal of Empirical Finance 1 (1993) 83-106. North-Holland A long memory property of stock market returns and a new model* Zhuanxin Ding, Clive W.J. Granger and Robert F. Engle Unrwrsily of Calfwxia, San Diego, CA, USA Received June 1992. Final version accepted February 1993 Abstract A ‘long memory’ property of stock market returns is investigated in this paper. It is found that not only there is substantially more correlation between absolute returns than returns them- selves, but the power transformation of the absolute return lrfl” also has quite high autocorrel- ation for long lags. It is possible to characterize lrfld to be ‘long memory’ and this property is strongest when d is around 1. This result appears to argue against ARCH type specifications based upon squared returns. But our Monte-Carlo study shows that both ARCH type models based on squared returns and those based on absolute return can produce this property. A new general class of models is proposed which allows the power 6 of the heteroskedasticity equation to be estimated from the data. 1. Introduction If Y, is the return from a speculative asset such as a bond or stock, this paper considers the temporal properties of the functions 1I,(~ for positive values of d. It is well known that the returns themselves contain little serial correlation, in agreement with the efficient market theory. However, Taylor (1986) found that /t-,1