Abstract
The article examines long memory in equity returns and volatility for South Africa using the ARFIMA-FIGARCH model in order to assess the efficiency of the market. The sample considered encompasses a period of equity market reform in order to ascertain if such reforms promoted efficiency in the market. The results show that volatility exhibits a predictable component in both sample periods, while returns in both sample periods do not. This suggests that equity market reforms had a benign impact on the market.
Notes
1For a selection of examples see, Barkoulas et al. (Citation2000) using Greek data, Lee et al. (2001) using data for China, Sadique and Silvapulle (2001) using seven Asian markets, Wright (Citation2001) for a variety of emerging markets, Nagayasu (2003) for Nikkei 225, Kilic Citation(2004) and DiSario et al. (Citation2007) who demonstrate the existence of long memory in Turkey and Assaf and Cavalcante Citation(2005) who found evidence of long memory in Brazilian returns.
2See, for example, Lo (Citation1991) and Chow et al. (1995) for US daily and monthly stock return indices, Mills (Citation1993) using monthly UK stock returns and Cheung and Lai (1995) who, in a detailed study comprising monthly stock indices of 18 industrialized countries, find that long memory does not provide a valid description of equity market return performance. Such evidence is, however, not exclusive to more established markets, for example, Resende and Teixeira (2002) do not find evidence to support long memory patterns in the Brazilian stock market for periods before and after the Real Stabilisation Plan.