Existence of Long Memory in Tehran Stock Exchange Indexes and its Impact on the Weak Form of Efficient Market Hypothesis (EMH)

Authors

1 Accounting Department, School of Economics and Administrative Science, Ferdowsi University of Mashhad,

2 Department of Accounting, Islamic Azad University, Science and Research Branch, Birjand, Iran.

Abstract

 
When there is a high correlation between observations of the past and far future and their relationship is not negligible, the time series under study is characterized by long memory. The presence of long memory in a time series has many potential applications in various fields of finance. In this study, the presence of long memory in return series of the insurance, banking, petroleum products, textiles, chemicals and agriculture is evaluated in Tehran Stock Exchange (the data for the period from 21/3/2009 to 21/3/2014) using the BDS test. Then the above test was confirmed by means of ARFIMA test. The results indicate that all studied parameters have a long memory. Finally, to confirm the presence of long memory in indexes, since the long-term memory makes its previous output dependent, a predictable parameter can be found in dynamic time series. This characterization is a reason for rejecting the weak form of efficient market hypothesis

Keywords

References

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Financial Management Strategy
Volume 2, Issue 1
June 2014
Pages 59-71

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History

  • Receive Date: 15 April 2015
  • Revise Date: 29 May 2018
  • Accept Date: 15 April 2015

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