fbpx

Hortense Santos – School of Business and Administration, Polytechnic Institute of Setúbal, Portugal
Rui Dias – School of Business and Administration, Polytechnic Institute of Setúbal, Portugal and CEFAGE-UE, IIFA,
University of Évora, Portugal
Cristina Vasco – School of Business and Administration, Polytechnic Institute of Setúbal, Portugal
Paulo Alexandre – School of Business and Administration, Polytechnic Institute of Setúbal, Portugal
Paula Heliodoro – School of Business and Administration, Polytechnic Institute of Setúbal, Portugal

DOI: https://doi.org/10.31410/EMAN.S.P.2021.1


5th International Scientific Conference – EMAN 2021 – Economics and Management: How to Cope With Disrupted Times, Online/Virtual, March 18, 2021, SELECTED PAPERS published by: Association of Economists and Managers of the Balkans, Belgrade, Serbia; ISBN 978-86-80194-44-8, ISSN 2683-4510

Abstract:

This paper aims to analyze the predictability of the stocks of Apple, Microsoft Amazon.com,
Tesla, Facebook, Samsung, Electronics, Johnson & Johnson, Walmart, in the period from October 1,
2019 to January 11, 2021. To carry out such an analysis, it is intended to answer two research questions,
namely: (i) is there predictability in the stock prices of the companies under analysis? (ii) Can investors
diversify risk by incorporating these companies’ shares into their portfolios? The results of the Exponents
Detrended Fluctuation Analysis (DFA) show that Apple (0.51) Microsoft (0.49), Amazon.com (0.53),
Samsung Electronics (0.53), Johnson & Johnson (0.53) do not have long memories in their time series,
that is, investors cannot obtain abnormal profitability without incurring additional risk. Walmart (0.41)
has anti-persistence, while Tesla (0.60), Facebook (0.55) indicate some predictability, meaning investors
adjusting their trading strategies to the necessary missteps may have some above-average profitability,
which partly rejects the first question of the research. To answer the second research question, we estimated
the Detrended cross-correlation coefficient (pDCCA) model, which indicates 17 mean correlation
coefficients (≈ 0.333 → ≈ 0.666), 7 strong cross-trend correlation coefficients (0.666 → ≈ 1,000), 4 weak
correlation coefficients (≈ 0.000 → ≈ 0.333). These results show that investors should be careful to incorporate
the shares of these companies into a single portfolio; the suggestion would be to group only the
shares of companies that do not present predictability and have low rhoDCCA. The authors consider that
this evidence will be important for institutional investors when carrying out trading strategies based on
maximizing profitability, but also mitigating risk when diversifying.

Keywords:

Covid-19, Predictability of stock prices, Diversification of portfolios.

REFERENCES

Alexandre, P., Dias, R., & Heliodoro, P. (2020). European Financial Market Integration: A Closer
Look at Government Bonds in Eurozone Countries. Balkans Journal of Emerging Trends
in Social Sciences. https://doi.org/10.31410/balkans.jetss.2020.3.1.78-86
Alexandre, P., Heliodoro, P., & Dias, R. (2019). The Contagion Effect In Europe: A DCC GARH
Approach. In 5th LIMEN Conference Proceedings (part of LIMEN conference collection).
https://doi.org/10.31410/limen.2019.73
Clemente, J., Montañés, A., & Reyes, M. (1998a). Testing for a unit root in variables with a double
change in the mean. Economics Letters. https://doi.org/10.1016/s0165-1765(98)00052-4
Clemente, J., Montañés, A., & Reyes, M. (1998b). Testing for a unit root in variables with a double
change in the mean. Economics Letters, 59(2), 175–182. https://doi.org/10.1016/S0165-
1765(98)00052-4
Dias, R. & Pereira, J. (2020). The Impact of the COVID-19 Pandemic on Stock Markets: Evidence
From a VAR Model, 1(2), 57–70. https://doi.org/10.4018/IJEGCC.2020070105
Dias, R., & Carvalho, L. (2020). Hedges and Safe Havens: An Examination OF Stocks, Gold and
Silver in Latin America‘s Stock Market, 1114–1132.

Dias, R., Alexandre, P., & Heliodoro, P. (2020). Contagion in the LAC Financial Markets: The
Impact of Stock Crises of 2008 and 2010. Littera Scripta. https://doi.org/10.36708/littera_
scripta2020/1/3
Dias, R., da Silva, J. V., & Dionysus, A. (2019). Financial markets of the LAC region: Does
the crisis influence the financial integration? International Review of Financial Analysis,
63(January), 160–173. https://doi.org/10.1016/j.irfa.2019.02.008
Dias, R., Heliodoro, P., & Alexandre, P. (2019). Risk Transmission Among Stock Markets in
LAC Region: Financial Crises Impact. In 5th LIMEN Selected Papers (part of LIMEN
conference collection). https://doi.org/10.31410/limen.s.p.2019.91
Dias, R., Heliodoro, P., & Alexandre, P. (2020). Efficiency of Asean-5 Markets: An Detrended
Fluctuation Analysis Učinkovitost trgov Asean-5: analyzes nihanj z odstranitvijo trenda,
13–19. https://doi.org/10.32015/JIBM.2020.12.2.2.13-19
Dias, R., Heliodoro, P., Alexandre, P., Santos, H., & Farinha, A. (2021). Long memory in stock
returns: Evidence from the Eastern European markets, 01029, 1–10.
Dias, R., Heliodoro, P., Alexandre, P., & Vasco, C. (2020a). Financial Market Integration of
ASEAN-5 with China: An Econophysics Approach. In 4th EMAN Conference Proceedings
(part of EMAN conference collection). https://doi.org/10.31410/eman.2020.17
Dias, R., Heliodoro, P., Alexandre, P., & Vasco, C. (2020b). The Shocks Between Oil Market
to the BRIC Stock Markets: A Generalized VAR Approach. In 4th EMAN Conference
Proceedings (part of EMAN conference collection). https://doi.org/10.31410/eman.2020.25
Dias, R., Heliodoro, P., Teixeira, N., & Godinho, T. (2020). Testing the Weak Form of Efficient
Market Hypothesis: Empirical Evidence from Equity Markets. International Journal of
Accounting, Finance and Risk Management. https://doi.org/10.11648/j.ijafrm.20200501.14
Dias, R., Pardal, P., Teixeira, N., & Machová, V. (2020). Financial Market Integration of ASEAN-
5 with China. Littera Scripta. https://doi.org/10.36708/littera_scripta2020/1/4
Dias, R., Teixeira, N., Machova, V., Sparrow, P., Horak, J., … Vochozka, M. (2020e). Random
walks and market efficiency tests: evidence on US, Chinese and European capital markets
within the context of the global Covid-19 pandemic, 11(4). https://doi.org/10.24136/
oc.2020.024
Heliodoro, P., Alexandre, Paulo & Dias, R. (2019). Financial markets of the lac region: convergence
after the financial crisis?, 45–52.
Heliodoro, P., Alexandre, P., Dias, R. (2019). The contagion effect in Europe: a DCC GARCH
Approach, 45–52.
Heliodoro, P., Dias, R., & Alexandre, P. (2020). Financial Contagion Between the US and
Emerging Markets: COVID-19 Pandemic Case. In 4th EMAN Selected Papers (part of
EMAN conference collection). https://doi.org/10.31410/eman.s.p.2020.1
Heliodoro, P., Dias, R., Alexandre, P., & Vasco, C. (2020). Integration in BRIC Stock Markets:
An Empirical Analysis. In 4th EMAN Selected Papers (part of EMAN conference collection).
https://doi.org/10.31410/eman.s.p.2020.33
Jarque, C.M., & Bera, A. K. (1980). Efficient tests for normality, homoscedasticity and serial
independence of regression residuals. Economics Letters, 6(3), 255–259. https://doi.
org/10.1016/0165-1765(80)90024-5
Jr., A.C.C., & Camba, A. L. (2020). The Existence of Random Walk in the Philippine Stock
Market: Evidence from Unit Root and Variance-Ratio Tests. The Journal of Asian Finance,
Economics and Business. https://doi.org/10.13106/jafeb.2020.vol7.no10.523
Kantelhardt, J. W., Koscielny-Bunde, E., Rego, H. H., Havlin, S., & Bunde, A. (2001). Detecting
long-range correlations with detrended fluctuation analysis. Physica A: Statistical Mechanics
and Its Applications, 295(3–4), 441–454. https://doi.org/10.1016/S0378-4371(01)00144-3

Levin, A., Lin, C. F., & Chu, C. S. J. (2002). Unit root tests in panel data: Asymptotic and finite-sample
properties. Journal of Econometrics. https://doi.org/10.1016/S0304-4076(01)00098-7
Sparrow, P., Dias, R., Šuleř, P., Teixeira, N., & Krulický, T. (2020). Integration in Central European
capital markets in the context of the global COVID-19 pandemic, 15(4). https://doi.
org/10.24136/eq.2020.027
Peng, C. K., Buldyrev, S. V., Havlin, S., Simons, M., Stanley, H. E., & Goldberger, A. L. (1994).
Mosaic organization of DNA nucleotides. Physical Review E, 49(2), 1685–1689. https://doi.
org/10.1103/PhysRevE.49.1685
Podobnik, B., & Stanley, H. E. (2008). Detrended cross-correlation analysis: A new method
for analyzing two nonstationary time series. Physical Review Letters, 100(8). https://doi.
org/10.1103/PhysRevLett.100.084102
Santos, H. & Dias, R. (2020). The Interactions of Stock Prices and Exchange Rates in the ASEAN-
5 Countries: The DCCA approach.

Download full paper


Share this