Memory in returns and volatilities of futures' contracts

Various authors claim to have found evidence of stochastic long-memory beha vior in futures' contract returns using the Hurst statistic. This paper ree xamines futures' returns for evidence of persistent behavior using a biased -corrected version of the Hurst statistic, a nonparametric spectral test, a nd a spectral-regression estimate of the long-memory parameter. Results bas ed on these new methods provide no evidence for persistent behavior in futu res' returns, However, they provide overwhelming evidence of long-memory be havior for the volatility of futures' returns. This finding adds to the eme rging literature on persistent volatility in financial markets and suggests the use of new methods of forecasting volatility, assessing risk, and opti mizing portfolios in futures' markets. (C) 2000 John Wiley & Sons, Inc.