Search

The analysis o f this study is twofold: 1) Using A non-linear test (the Hinich test), it provides evidence of non-linear dynamics in stock prices in the American market from January 1955 to December 2002. 2) Utilizing non-linear regression models, the Multiple Adaptive Regression Splines (MARS) and fl-Splines, the study examines the relationship between stock prices and their fundamentals. Non-linear results are compared with linear. The predictive ability ofthe non-linear models outperforms the linear. As a result, the study suggests that non-linear models should be consideredfor the analysis ofstock prices.