Deterministic nonlinearity in the stock returns of major European equity markets and the United States |
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Authors: | Vivek Pandey Theodor Kohers Gerald Kohers |
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Institution: | Assistant Professor of Finance, Mississippi University for Women, Columbus, MS 39701;Professor of Finance and International Business, Mississippi State University. Mississippi State, MS 39762–9580;Assistant Professor of Management Information Systems, Sam Houston State University, Huntsville, TX 77341–2056 |
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Abstract: | 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. |
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Keywords: | nonlinear chaos efficiency |
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