Details
| Original language | English |
|---|---|
| Pages (from-to) | 661-682 |
| Number of pages | 22 |
| Journal | Empirical Economics |
| Volume | 60 |
| Issue number | 2 |
| Early online date | 19 Oct 2019 |
| Publication status | Published - Feb 2021 |
Abstract
The present study analyzes the interrelationship among daily high and low stock market indices in some developing stock markets with the perspective of fractional integration and cointegration. The analysis is performed by applying fractionally cointegrated vector error correction models (FVECM) as they can explain the short-run and long-run dynamics of high and low stock prices simultaneously. This study employs daily stock market index data from six major Asian countries and finds that daily (log) highs and lows do follow a long-run relationship. We find very slow hyperbolic decay of autocorrelations in the range series for all observed stock prices, and this dependence supports the hypothesis of nonstationary volatility in some cases. Forecasted highs and lows based on the FVECM provide better forecasts than traditional models based on the MSE and MAE. The FVECM range forecasts also show better out of sample performance over the HAR and ARFIMA models fitted to the range series.
Keywords
- ARFIMA, Cointegration, Convergence, DM, Forecasts, Fractional integration, FVECM, HAR, Long-run relationship
ASJC Scopus subject areas
- Mathematics(all)
- Statistics and Probability
- Mathematics(all)
- Mathematics (miscellaneous)
- Social Sciences(all)
- Social Sciences (miscellaneous)
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
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In: Empirical Economics, Vol. 60, No. 2, 02.2021, p. 661-682.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Modeling fractional cointegration between high and low stock prices in Asian countries
AU - Afzal, Alia
AU - Sibbertsen, Philipp
N1 - Funding Information: The first author gratefully acknowledges the financial support of Deutscher Akademischer Austauschdienst (DAAD) Germany, and Higher Education Commission (HEC) Pakistan. 1. The expected time taken by a unit shock to revert 50% of its deviations from the long-run equilibrium is defined as half-life. 2. The results for h = 5 , 10 3. The results for h = 5 , 10
PY - 2021/2
Y1 - 2021/2
N2 - The present study analyzes the interrelationship among daily high and low stock market indices in some developing stock markets with the perspective of fractional integration and cointegration. The analysis is performed by applying fractionally cointegrated vector error correction models (FVECM) as they can explain the short-run and long-run dynamics of high and low stock prices simultaneously. This study employs daily stock market index data from six major Asian countries and finds that daily (log) highs and lows do follow a long-run relationship. We find very slow hyperbolic decay of autocorrelations in the range series for all observed stock prices, and this dependence supports the hypothesis of nonstationary volatility in some cases. Forecasted highs and lows based on the FVECM provide better forecasts than traditional models based on the MSE and MAE. The FVECM range forecasts also show better out of sample performance over the HAR and ARFIMA models fitted to the range series.
AB - The present study analyzes the interrelationship among daily high and low stock market indices in some developing stock markets with the perspective of fractional integration and cointegration. The analysis is performed by applying fractionally cointegrated vector error correction models (FVECM) as they can explain the short-run and long-run dynamics of high and low stock prices simultaneously. This study employs daily stock market index data from six major Asian countries and finds that daily (log) highs and lows do follow a long-run relationship. We find very slow hyperbolic decay of autocorrelations in the range series for all observed stock prices, and this dependence supports the hypothesis of nonstationary volatility in some cases. Forecasted highs and lows based on the FVECM provide better forecasts than traditional models based on the MSE and MAE. The FVECM range forecasts also show better out of sample performance over the HAR and ARFIMA models fitted to the range series.
KW - ARFIMA
KW - Cointegration
KW - Convergence
KW - DM
KW - Forecasts
KW - Fractional integration
KW - FVECM
KW - HAR
KW - Long-run relationship
UR - http://www.scopus.com/inward/record.url?scp=85074878299&partnerID=8YFLogxK
U2 - 10.1007/s00181-019-01784-4
DO - 10.1007/s00181-019-01784-4
M3 - Article
AN - SCOPUS:85074878299
VL - 60
SP - 661
EP - 682
JO - Empirical Economics
JF - Empirical Economics
SN - 0377-7332
IS - 2
ER -