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High level chaos in the exchange and index markets

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  • BenSaïda, Ahmed
  • Litimi, Houda

Abstract

Many studies were inconclusive about the presence of chaos in financial markets due to test misspecification. Chaos tests present in the literature need noise-free time series, since any measurement error will induce the rejection of chaos. Moreover, chaos was merely tested on a low-level basis. This paper investigates the presence of a high-level noisy chaos in financial data; simulations were conclusive about the power of the test. When applied to six stock indexes and six exchange rates, the hypothesis of chaotic dynamics was rejected for all data.

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  • BenSaïda, Ahmed & Litimi, Houda, 2013. "High level chaos in the exchange and index markets," Chaos, Solitons & Fractals, Elsevier, vol. 54(C), pages 90-95.
    • Handle: RePEc:eee:chsofr:v:54:y:2013:i:c:p:90-95
    DOI: 10.1016/j.chaos.2013.06.004
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