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Evaluation Of Long-Term Memory In Colombian Stock Market By Hurst Coefficient, Evaluacion De La Memoria De Largo Plazo Del Mercado Bursatil Colombiano Mediante El Coeficiente De Hurst

Author

Listed:
  • Juan Benjamin Duarte Duarte
  • Katherine Julieth Sierra Suarez
  • Juan Manuel Mascarenas Perez-Inigo

Abstract

The efficient market hypothesis states that financial asset returns follow a random walk and depend on the information made available to the market instantly, therefore they can not be predicted. On the other hand, the Fractal market hypothesis says that prices depend of each behavior investor and his investment horizon, producing chaotic behavior in the markets. This paper tests the existence of chaotic behavior in major financial series of the Colombian stock market using the Hurst coefficient, whose estimation can be affected by autocorrelation. Therefore, the first part of the methodology focuses on removing the autocorrelations by ARIMA and GARCH filters, while the second part corresponds to the detectection of behavior by calculating the Hurst coefficient. The results reveal that the Colombian financial assets are persistent.

Suggested Citation

  • Juan Benjamin Duarte Duarte & Katherine Julieth Sierra Suarez & Juan Manuel Mascarenas Perez-Inigo, 2014. "Evaluation Of Long-Term Memory In Colombian Stock Market By Hurst Coefficient, Evaluacion De La Memoria De Largo Plazo Del Mercado Bursatil Colombiano Mediante El Coeficiente De Hurst," Revista Internacional Administracion & Finanzas, The Institute for Business and Finance Research, vol. 7(4), pages 1-10.
    • Handle: RePEc:ibf:riafin:v:7:y:2014:i:4:p:1-10
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Chaos Theory; EMH; FMH; GARCH; ARIMA;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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