Abstract
Assessing whether stock markets have reflected changes to macroeconomic fundamentals has been one of the most engaging topics recently. This paper considers the effects on multi-step prediction of using semiparametric local Whittle estimators rather than MLE for long memory ARFIMA model. By testing the efficiency of the China’s stock market with ARFIMA model analyses of selected the representative stock price index. The analysis indicated that most of stock price index time series are mean reverting over the long run and follow a long memory process, offering evidence against weakform efficient market hypothesis (EMH).The ARFIMA model establishes the presence of patterns in the historic time series of the China’s stock market, providing additional support against the weak-form EMH.
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