A search for long memory in international stock market returns

A major issue in financial economics is the behavior of stock returns over long as opposed to short horizons. This study provides empirical evidence from the perspective of long memory analysis. International evidence on long memory is explored using the Morgan Stanley Capital International stock index data for eighteen countries. Two tests that are robust to short-term dependence and conditional heteroskedasticity are employed: a modified rescaled range test and a fractional differencing test. The empirical results in general provide little support for long memory in international stock returns. The findings are not sensitive to inflation adjustments in stock returns, data sources, and statistical methods used.