Chaotic behavior in national stock market indices

New evidence from the close returns test

Michael D. McKenzie*

*Corresponding author for this work

Research output: Contribution to journalArticle

31 Citations (Scopus)


Attempts have been made to detect chaotic behaviour in financial markets data using techniques which require large, clean data sets. Although such data are common in the physical sciences where these tests were developed, financial returns data typically do not conform. The close returns test is a recent innovation in the literature and is better suited to testing for chaos in financial markets. This paper tests for the presence of chaos in a wide range of major national stock market indices using the close returns test. The results indicate that the data are not chaotic, although considerable nonlinearities are present. The commonly used BDS test is also applied to the data and, in comparison, the close returns test provides substantially more evidence of nonlinearity compared to the BDS test.

Original languageEnglish
Pages (from-to)35-53
Number of pages19
JournalGlobal Finance Journal
Issue number1
Publication statusPublished - Mar 2001


  • BDS
  • Chaos
  • Close returns test
  • Nonlinearity

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