Forecasting the Spanish Stock Market Returns with Fractional and Non-Fractional Models

  1. Guglielmo Maria Caporale 2
  2. Juncal Cunado 1
  3. Luis A. Gil-Alana 1
  1. 1 Universidad de Navarra
    info

    Universidad de Navarra

    Pamplona, España

    ROR https://ror.org/02rxc7m23

  2. 2 Brunel University London
    info

    Brunel University London

    Uxbridge, Reino Unido

    ROR https://ror.org/00dn4t376

Revista:
American Journal of Economics and Business Administration

ISSN: 1945-5488

Any de publicació: 2011

Volum: 3

Número: 4

Pàgines: 586 - 588

Tipus: Article

GOOGLE SCHOLAR

Altres publicacions en: American Journal of Economics and Business Administration

Resum

Problem statement: The content of this note was to assess the forecasting accuracy ofvarious models of the Spanish stock market returns. Approach: We use daily data on the IBEX 35 for the time period January 4th, 2001-March 28th, 2006 and employ both fractional and non-fractional models. Results: The results on the prediction errors for the out-of-sample forecasts indicate that the fractional models outperform the non-fractional ones. Conclusion: Standard forecasting criteria suggest that the ARFIMA (1, d, 0) model with d = -0.017 and the AR (1) coefficient equal to 0.068 is the best specification for this series. That implies that the stock market prices display a very small degree of mean reversion behavior.