On the long-term or short-term dependence in stock prices: Evidence from international stock markets

This study examines the short- and long-term dependence in the United States and 21 international equity market indexes. Two heteroscedastic-robust testing methods, the modified rescaled range analysis and the rescaled variance ratio test, are employed to test for the existence of dependence. The evidence consistently reveals the absence of long-term dependence in these 22 stock returns indexes. The random walk hypothesis for most, but not all, stock returns indexes is not rejected. When the random walk hypothesis is rejected, the evidence supporting the rejection is weak and the stochastic dependence occurs mainly in short-horizon, rather then long-horizon holding period returns.