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Kian-Ping Lim and Melvin J. Hinich
 
''Cross-temporal universality of non-linear dependencies in Asian stock markets''
( 2005, Vol. 7 No.1 )
 
 
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.
 
 
Keywords:
JEL: G1 - General Financial Markets: General (includes Measurement and Data)
 
Manuscript Received : Oct 10 2004 Manuscript Accepted : Jan 23 2005

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