Time-varying long-range dependence in stock market returns and financial market disruptions – a case of eight European countries

Abstract

The long-range dependence (or long memory) in stock market returns has many implications for modern financial economics. The existent empirical studies on long-range dependence in stock market returns, however, do not examine it on a dynamical basis. In this article we applied a rolling window approach to prove that long-range dependence parameter for eight European stock market returns is time-varying. Our findings show that sharp, but temporary, increases of long-range dependence parameter for investigated stock market returns in the period October 1999 to April 2011 coincided with the major financial market disruptions in the world and Europe.

Keywords:

• stock market
• long-range dependence
• financial crises
• Europe

JEL Classification:

• G12
• G14

Notes