## Are European equity markets efficient? New evidence from fractal analysis

Citations: | 2 - 0 self |

### BibTeX

@MISC{Onali_areeuropean,

author = {Enrico Onali and John Goddard},

title = {Are European equity markets efficient? New evidence from fractal analysis},

year = {}

}

### OpenURL

### Abstract

Abstract: Fractal analysis is carried out on the stock market indices of six developed European countries. Evidence is found of long-range autocorrelation in the log return series of the Mibtel, the index of the Italian stock market, in contravention of the Random Walk Hypothesis. Long-range autocorrelation implies that predictable patterns in the log returns do not dissipate quickly, and may therefore produce potential arbitrage opportunities. No evidence contrary to the Random Walk Hypothesis is found for the other five stock markets.

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Citation Context ...., 2004; Norouzzadeh and Jafari, 2005; Onali and Goddard, 2009), as well as commodities markets (Cheung and Lai, 1993; Alvarez-Ramirez et al., 2002; Serletis and Rosenberg, 2007), and exchange rates (=-=Mulligan, 2000-=-; Kim and Yoon, 2004; Da Silva et al., 2007). Recently, the connection between the Hurst exponent and market crashes has been investigated (Grech and Mazur, 2004; Grech and Pamula, 2008). Cajueiro and... |

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Citation Context ...o not find evidence of persistence for four US stock market indices. International equity markets have also been examined (Cheung and Lai, 1995; Opong et al., 1999; Howe et al., 1999; McKenzie, 2001; =-=Costa and Vasconcelos, 2003-=-; Kim and Yoon, 2004; Zhuang et al., 2004; Norouzzadeh and Jafari, 2005; Onali and Goddard, 2009), as well as commodities markets (Cheung and Lai, 1993; Alvarez-Ramirez et al., 2002; Serletis and Rose... |

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Citation Context ...e scales, or persistent. Temporal self-affinity ensures that ‘[…] the distribution of returns over different sampling intervals are identical except for a single, non-random contraction’ (Mandelbrot, =-=Fisher and Calvet, 1997-=-, p. 8). This has important consequences for researchers, as a time-inconsistent model renders the results reliable only for the selected time scale. For example, if weekly data are analysed, the resu... |

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Citation Context ...), and exchange rates (Mulligan, 2000; Kim and Yoon, 2004; Da Silva et al., 2007). Recently, the connection between the Hurst exponent and market crashes has been investigated (Grech and Mazur, 2004; =-=Grech and Pamula, 2008-=-). Cajueiro and Tabak (2004, 2005) endeavour to rank the degree of efficiency of emerging markets on the basis of the Hurst exponent for either stock returns or volatility of returns. Their findings d... |

2 |
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Citation Context ...ly, Serletis and Rosenberg (2009) do not find evidence of persistence for four US stock market indices. International equity markets have also been examined (Cheung and Lai, 1995; Opong et al., 1999; =-=Howe et al., 1999-=-; McKenzie, 2001; Costa and Vasconcelos, 2003; Kim and Yoon, 2004; Zhuang et al., 2004; Norouzzadeh and Jafari, 2005; Onali and Goddard, 2009), as well as commodities markets (Cheung and Lai, 1993; Al... |

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Citation Context ...senberg (2009) do not find evidence of persistence for four US stock market indices. International equity markets have also been examined (Cheung and Lai, 1995; Opong et al., 1999; Howe et al., 1999; =-=McKenzie, 2001-=-; Costa and Vasconcelos, 2003; Kim and Yoon, 2004; Zhuang et al., 2004; Norouzzadeh and Jafari, 2005; Onali and Goddard, 2009), as well as commodities markets (Cheung and Lai, 1993; Alvarez-Ramirez et... |

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Citation Context ...e Paretian distribution, ψ(t), can be expressed as follows (Elton et al., 1975, p. 232): 3 Stable Paretian distribution is also referred to as Mandelbrot-Lévy, L-stable, Lévy-stable, and Pareto-Lévy (=-=Mulligan, 2004-=-). 5α �ln�ψ �t�� � iδt � υ t w( t, d) � � � � � πα � � � tan w( t, d) � 1� iζ �t / t � � � � � 2 � � �� 2 / π ln t if α � 1 �� �� � �� if α � 1�� (3) Where i � �1 . There are four parameters that def... |

2 |
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Citation Context ...t depend on n. That is, ( n) k ( 1) k k k ( n) ( 2H �1) ρ � ρ for n ≥ 1 and k ≥ 1. The first-order autocorrelation is � � 2 1for n ≥ 1, and o 1 � (n) there are equivalent expressions for � for k > 1 (=-=Onali and Goddard, 2009-=-). k Fractional Brownian Motion (FBM) satisfies the property of self-affinity 1 . The FBM is a generalisation of the Brownian Motion, used to define a random walk process, and was introduced by Mandel... |

1 | Moment condition failure Australian evidence. University of Antwerp, Faculty of Applied Economics, Working Paper No 10 - Annaert, Ceuster, et al. - 2001 |

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Citation Context ...tribution is skewed to the right and if ζ < 0 the distribution is skewed to the left. As α � 2 , the distribution tends to become symmetric and ζ becomes irrelevant for the shape of the distribution (=-=Jin and Frechette, 2002-=-). α ≤ 2 4 is a measure of the kurtosis of the distribution, i.e. the degree to which the data are clustered around the mean, and of the ‘fatness’ of the tails. α = 2 for a Normal distribution and α <... |

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Citation Context ...tence for four US stock market indices. International equity markets have also been examined (Cheung and Lai, 1995; Opong et al., 1999; Howe et al., 1999; McKenzie, 2001; Costa and Vasconcelos, 2003; =-=Kim and Yoon, 2004-=-; Zhuang et al., 2004; Norouzzadeh and Jafari, 2005; Onali and Goddard, 2009), as well as commodities markets (Cheung and Lai, 1993; Alvarez-Ramirez et al., 2002; Serletis and Rosenberg, 2007), and ex... |

1 |
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Citation Context ...nternational equity markets have also been examined (Cheung and Lai, 1995; Opong et al., 1999; Howe et al., 1999; McKenzie, 2001; Costa and Vasconcelos, 2003; Kim and Yoon, 2004; Zhuang et al., 2004; =-=Norouzzadeh and Jafari, 2005-=-; Onali and Goddard, 2009), as well as commodities markets (Cheung and Lai, 1993; Alvarez-Ramirez et al., 2002; Serletis and Rosenberg, 2007), and exchange rates (Mulligan, 2000; Kim and Yoon, 2004; D... |

1 | A multifractal detrended fluctuation description of Iralian rial-US dollar exchange rate - Norouzzadeh, Rahmani - 2006 |