Abstract:

The purpose of this paper is to assess and test long-term memory in the Portuguese stock market returns. Rescaled-Range Analysis (classical and modified) and Detrended Fluctuation Analysis were used to measure the degree of dependence. The estimations of Hurst exponents evidence long memory, in the form of persistence. Complementarily, Rescaled-Range Tests (classical and modified) and Fractional Differencing Test suggest a stochastic process of short-term memory that degenerates over long periods. Dynamics of fractal structure, where it is found, refutes the Efficient Market Hypothesis, and may compromise the perfect arbitrage, making the markets more risky to invest.