SHS Web Conf.
Volume 91, 2021Innovative Economic Symposium 2020 – Stable Development in Unstable World (IES2020)
|Number of page(s)||10|
|Section||Stable Development in Unstable World|
|Published online||14 January 2021|
Long memory in stock returns: Evidence from the Eastern European markets
1 School of Business and Administration, Polytechnic Institute of Setúbal, Portugal and CEFAGE-UE, IIFA, University of Évora, Portugal.
2 School of Business and Administration, Polytechnic Institute of Setúbal, Portugal.
* Corresponding author: firstname.lastname@example.org
This essay aims to analyze the impact of the 2020 global pandemic on the memory properties of the Eastern Europe stock markets, from the period between 1 January 2016 to 2 September 2020, the sample was divided in two subperiods: 1 January 2016 to 30 August 2019 (before Covid 19) and 2 September 2019 to 2 September 2020 (after Covid 19). To perform this analysis, different approaches were undertaken to analyze whether if: (i) the global pandemic (Covid-19) accentuated the exponents Detrended Fluctuation Analysis (DFA) and the Detrended Cross-Correlation Analysis (𝑝𝐷𝐶𝐶𝐴) in the Eastern European stock markets?. The daily returns do not have normal distributions, they have negative asymmetries, leptocubtic, and also exhibit conditional heteroscedasticity. The exponents Detrended Fluctuation Analysis (DFA), during the Covid-19 period, range from 0.64 to 0.75, showing significant long memories in all markets, except for the SLOVAKIA market (0.45). When we compared the 2 subperiods, we found that 41 pairs of markets have cross-correlation coefficients without trend ( λDCCA) strong (out of 45 possible), and 4 pairs of markets decreased the 𝑟ℎ𝑜𝐷𝐶𝐶𝐴 in particular the markets ESTONIA-SLOVAKIA, LITHUANIA-SLOVAKIA, HUNGARY-SLOVAKIA, POLAND-SLOVAKIA. These findings show that the assumption of the market efficiency hypothesis may be in question, since the prediction of market movement can be improved if we consider the out-of-lag movements of the other markets, enabling the occurrence of arbitrage operations and some difficulties in portfolio diversification.
Key words: Eastern European markets / long memories / arbitration / portfolio diversification
© The Authors, published by EDP Sciences, 2021
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