Open AccessNonlinearity in financial series: transitory or permanent?
Author(s) -
Elisa Espinosa,
Juan Gorigoitía,
Carlos Maquieira
Publication year - 2019
Publication title -
estudios de administración/estudios de administración
Language(s) - English
Resource type - Journals
eISSN - 0719-0816
pISSN - 0717-0653
DOI - 10.5354/0719-0816.2019.55403
Subject(s) - nonlinear system , series (stratigraphy) , window (computing) , econometrics , mathematics , economics , financial market , computer science , finance , physics , geology , paleontology , quantum mechanics , operating system
In this article we present evidence that nonlinearity episodes in financial series are more permanent than transitory. At the same time, these episodes show different behaviors depending on the market analyzed, which would indicate that they are not completely synchronized. On the other hand, the size of the window for detecting nonlinear episodes has an impact on the number of nonlinear windows found, as well as the percentage of nonlinear windows with respect to the total number of windows, confirming a window size effect. The results strongly invalidate the efficient markets hypothesis and forcefully explain the incapability to predict its future values.