Dual long memory and commodities' volatility spillover in capital markets

The Efficient Markets Hypothesis is defined as fast and accurate pricing of all possible information by the market. According to the Efficient Markets Hypothesis; the prices move randomly and investors behave rationally (Homoeconomicus). Therefore, future price movements cannot be forecasted by using investment strategies and it is not possible to earn more than average market return. In terms of the capital markets, the notion of dual long memory indicates simultaneous analyzing both return and conditional variance based on the random walk. The concept of spillover (transmission) remarks determination of external information concerning markets. In this context, the aim of the study is making internal analysis (endogenous - memory); and external (exogenous –spillover) analysis based on the oil market (WTI and OVX) on the efficiency of G7 and Turkey stock markets after 2008-2009 financial crisis. ARFIMA-FIGARCH, ARFIMA-HYGARCH ARFIMA-FIEGARCH and ARFIMA-FIAPARCH models were used to analyze dual long memory; GARCH model used to analyze spillover effect. As a result of dual long memory analysis, middle term memory- antidependence- negative autocorrelation was determined in the the return series of Germany, France, England, USA, Canada and Turkey stock markets. In the conditional volatility, long memory property was detected all of the stock markets except Japan (short memory). Additionally it was determined that structural breaks dates in variance were specified by Kappa-1 or Kappa-2, affects long memory. The results of memory analysis showed that Japan stock market was so close to weak form efficiency, but others were not even weak form. As a result of spillover analysis, it was determined that WTI crude oil price was not a source of exogenous information for all stock markets except the USA, but OVX was the source of information. Keywords: Efficient Markets Hypothesis, Dual Long Memory, Oil Market, Spillover, Uncertainty and Expectation