TY  - JOUR
AU  - Lo,Andrew W.
TI  - Long-term Memory in Stock Market Prices
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2984
PY  - 1989
Y2  - May 1989
UR  - http://www.nber.org/papers/w2984
L1  - http://www.nber.org/papers/w2984.pdf
N1  - Author contact info:
Andrew W. Lo
MIT Sloan School of Management
100 Main Street, E62-618
Cambridge, MA  02142
Tel: 617/253-0920
Fax: 781/891-9783
E-Mail: alo@mit.edu
AB  - A test for long-run memory that is robust to short-range dependence is developed. It is a simple extension of Mandelbrot's "range over standard deviation" or R/S statistic, for which the relevant asymptotic sampling theory is derived via functional central limit theory. This test is applied to daily, weekly, monthly, and annual stock returns indexes over several different time periods. Contrary to previous findings, there is no evidence of long-range dependence in any of the indexes over any sample period or sub-period once short-term autocorrelations are taken into account. Illustrative Monte Carlo experiments indicate that the modified R/S test has power against at least two specific models of long-run memory, suggesting that stochastic models of short-range dependence may adequately capture the time series behavior of stock returns.
ER  -