Review of Quantitative Finance and Accounting

, Volume 6, Issue 2, pp 181–194

On the long-term or short-term dependence in stock prices: Evidence from international stock markets

  • K. Victor Chow
  • Ming-Shium Pan
  • Ryoichi Sakano
Article

Abstract

This study examines the short- and long-term dependence in the United States and 21 international equity market indexes. Two heteroscedastic-robust testing methods, the modified rescaled range analysis and the rescaled variance ratio test, are employed to test for the existence of dependence. The evidence consistently reveals the absence of long-term dependence in these 22 stock returns indexes. The random walk hypothesis for most, but not all, stock returns indexes is not rejected. When the random walk hypothesis is rejected, the evidence supporting the rejection is weak and the stochastic dependence occurs mainly in short-horizon, rather then long-horizon holding period returns.

Key words

short-term/long-term dependence heteroscedastic-robust testing methods random walk hypothesis 

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Copyright information

© Kluwer Academic Publishers 1996

Authors and Affiliations

  • K. Victor Chow
    • 1
  • Ming-Shium Pan
    • 2
  • Ryoichi Sakano
    • 3
  1. 1.Department of FinanceWest Virginia UniversityMorgantownUSA
  2. 2.Department of Finance, Management Science, and Information SystemsShippensburg UniversityShippensburgUSA
  3. 3.School of Business and EconomicsNorth Carolina A&T State UniversityGreensboroUSA

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