Modeling Long Memory In The Russian Stock Market: Evidence From Major Sectoral Indices

Abstract

This paper studies the market efficiency of modern Russian stock market. In particular, we look at the long memory in stock market volatility in the Russian financial market. To examine the temporal dependencies in depth we utilize major sectors of the Russian stock market. We take a GARCH modeling approach. Specifically, we estimate a FIGARCH model proposed by Baillie et al. (1996) using daily returns. We find evidence of long memory in all sectors of the Russian equity market, implying that, all the market sectors under investigation are weak form inefficient. Our results show that the volatility has a predictable structure in all the sectors of modern Russian stock market, signifying the need of regulatory and economic reforms within the Russian financial system.