Nonlinear event detection in the Chilean stock market

This study searches for economic and political events that may explain the episodic nonlinearities detected in the returns series of the Chilean stock market index. This methodology is a reverse form of event study. After applying the Hinich portmanteau bicorrelation test to detect episodes of nonlinear behaviour of the index, we investigate what might be the explanation of this behaviour. Our findings may help to explain the difficulty to forecast asset returns. We also shed some light into the major political and economic events that contribute to the numerous short bursts of nonlinear dependence in the Chilean stock market.