High and low prices and the range in the European stock markets: A long-memory approach

Caporale, G.M. (Guglielmo M.); Gil-Alana, L.A. (Luis A.); Poza, C. (Carlos)

Authors:

Caporale, G.M. (Guglielmo M.)

Gil-Alana, L.A. (Luis A.)

Poza, C. (Carlos)

Keywords:

High and low prices
Range
Fractional integration

Issue Date:

2020

Project:

info:eu-repo/grantAgreement/AEI/Plan Estatal de Investigación Científica y Técnica y de Innovación 2013-2016/ECO2017-85503-R/ES/INTEGRACION FRACCIONAL, PROCESOS DE MEMORIA LARGA Y NO LINEALIDADES EN SERIES DE TIEMPO. EVIDENCIA EN LOS PAISES EN VIAS DE DESARROLLO

ISSN:

0275-5319

Note:

This is an open access article under the CC BY license (http://creativecommons.org/licenses/BY/4.0/).

Citation:

Caporale, G.M. (Guglielmo M.); Gil-Alana, L.A. (Luis A.); Poza, C. (Carlos). "High and low prices and the range in the European stock markets: A long-memory approach". Research in International Business and Finance. 52, 2020, 101126

Abstract

This paper uses fractional integration techniques to examine the stochastic behaviour of high and low stock prices in Europe and then to test for the possible existence of long-run linkages between them by looking at the range, i.e., the difference between the two logged series. Specifically, monthly, weekly and daily data on the following five European stock market indices are analysed: DAX30 (Germany), FTSE100 (UK), CAC40 (France), FTSE MIB40 (Italy) and IBEX35 (Spain). In all cases, the order of integration of the range is lower than that of the original series, which implies the existence of a long-run equilibrium relationship between high and low prices. Further, multiple breaks are found in the high and low-price series but no breaks in the range, and the estimated fractional differencing parameter is positive in all cases, which represents evidence of long memory.

URI:

https://hdl.handle.net/10171/66330

DOI:

10.1016/j.ribaf.2019.101126

Appears in Collections:

DA - Economía - Artículo de revista

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