Long-memory in asset returns and volatility: evidence from West Africa

Abstract

This paper measures the degree of long-memory or long-range dependence in asset returns and volatility of two stock indices in Ghana and Nigeria. The presence of long-memory opens up opportunities for abnormal returns to be made by analyzing price history of a particular market. The authors employ the Hurst exponent to measure the degree of long-memory which is evaluated by a semiparametric method, the Local Whittle estimator. The findings show strong evidence of the presence of long-memory in both returns and volatility of the indices studied, suggesting that neither of the markets in Ghana and Nigeria is weak-form efficient