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Deterministic nonlinearity in the stock returns of major European equity markets and the United States
Author(s) -
Pandey Vivek,
Kohers Theodor,
Kohers Gerald
Publication year - 1998
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1998.tb01606.x
Subject(s) - inefficiency , equity (law) , stock (firearms) , economics , chaotic , financial economics , econometrics , nonlinear system , financial market , stock market , finance , geography , microeconomics , political science , context (archaeology) , physics , management , archaeology , quantum mechanics , law
By using recently developed statistical tools designed to overcome some of the limitations often associated with financial data, this study attempts to detect low‐dimensional deterministic chaos in five major European stock markets and the United States. Country indexes exhibiting low‐dimensional deterministic chaos may contain some informational inefficiency; thus, it may be possible to use nonlinear dynamics to predict future stock returns. The results do not provide evidence of the existence of low‐dimensional chaotic systems in any of the examined indexes. As such, the notion of market efficiency in the examined indexes is not threatened by the findings of this study.