The stochastic behavior of stock indices: a test of long memory in the Kuala Lumpur Stock Exchange

Characterization of the stochastic process of stock market indices is vital in understanding the behavior of stock prices. Conventional share valuation models are subject to the nature of inter-temporal dependence between current and past movements. This paper studies the stochastic process of four...

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Main Author:	Noor Azlan Ghazali
Format:	Article
Language:	English
Published:	Penerbit Universiti Kebangsaan Malaysia 1998
Online Access:	http://journalarticle.ukm.my/7978/ http://journalarticle.ukm.my/7978/ http://journalarticle.ukm.my/7978/1/820-1566-1-SM.pdf

id	ukm-7978
recordtype	eprints
spelling	ukm-79782016-12-14T06:45:49Z http://journalarticle.ukm.my/7978/ The stochastic behavior of stock indices: a test of long memory in the Kuala Lumpur Stock Exchange Noor Azlan Ghazali, Characterization of the stochastic process of stock market indices is vital in understanding the behavior of stock prices. Conventional share valuation models are subject to the nature of inter-temporal dependence between current and past movements. This paper studies the stochastic process of four KLsE indices (Composite Index,Industrial Index, Finatice Index, and Property Index). In addition to the standard unit root tests, the ARFlMA (Autoregressive Fractionally Integrated Moving Average) model which belongs to the class of long memory process is applied in the empirical analysis. The findings indicate that while the level of the indices is nonstationary, its growth rate exhibits stationary properties. Long memory is not supported for the level of the indices but is evidenced in its monthly growth rate. The growth rate of the indices can therefore be characterized as a long memory process that is mean reverting. Penerbit Universiti Kebangsaan Malaysia 1998 Article PeerReviewed application/pdf en http://journalarticle.ukm.my/7978/1/820-1566-1-SM.pdf Noor Azlan Ghazali, (1998) The stochastic behavior of stock indices: a test of long memory in the Kuala Lumpur Stock Exchange. Jurnal Pengurusan, 17 . pp. 31-40. ISSN 0127-2713 http://ejournals.ukm.my/pengurusan/issue/view/207
repository_type	Digital Repository
institution_category	Local University
institution	Universiti Kebangasaan Malaysia
building	UKM Institutional Repository
collection	Online Access
language	English
description	Characterization of the stochastic process of stock market indices is vital in understanding the behavior of stock prices. Conventional share valuation models are subject to the nature of inter-temporal dependence between current and past movements. This paper studies the stochastic process of four KLsE indices (Composite Index,Industrial Index, Finatice Index, and Property Index). In addition to the standard unit root tests, the ARFlMA (Autoregressive Fractionally Integrated Moving Average) model which belongs to the class of long memory process is applied in the empirical analysis. The findings indicate that while the level of the indices is nonstationary, its growth rate exhibits stationary properties. Long memory is not supported for the level of the indices but is evidenced in its monthly growth rate. The growth rate of the indices can therefore be characterized as a long memory process that is mean reverting.
format	Article
author	Noor Azlan Ghazali,
spellingShingle	Noor Azlan Ghazali, The stochastic behavior of stock indices: a test of long memory in the Kuala Lumpur Stock Exchange
author_facet	Noor Azlan Ghazali,
author_sort	Noor Azlan Ghazali,
title	The stochastic behavior of stock indices: a test of long memory in the Kuala Lumpur Stock Exchange
title_short	The stochastic behavior of stock indices: a test of long memory in the Kuala Lumpur Stock Exchange
title_full	The stochastic behavior of stock indices: a test of long memory in the Kuala Lumpur Stock Exchange
title_fullStr	The stochastic behavior of stock indices: a test of long memory in the Kuala Lumpur Stock Exchange
title_full_unstemmed	The stochastic behavior of stock indices: a test of long memory in the Kuala Lumpur Stock Exchange
title_sort	stochastic behavior of stock indices: a test of long memory in the kuala lumpur stock exchange
publisher	Penerbit Universiti Kebangsaan Malaysia
publishDate	1998
url	http://journalarticle.ukm.my/7978/ http://journalarticle.ukm.my/7978/ http://journalarticle.ukm.my/7978/1/820-1566-1-SM.pdf
first_indexed	2023-09-18T19:51:08Z
last_indexed	2023-09-18T19:51:08Z
_version_	1777406227454623744

The stochastic behavior of stock indices: a test of long memory in the Kuala Lumpur Stock Exchange

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