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Hurst exponents, power laws, and efficiency in the Brazilian foreign exchange market

Listed author(s):
  • Sergio Da Silva

    ()

    (Department of Economics, Federal University of Santa Catarina)

  • Annibal Figueiredo

    ()

    (Department of Physics, University of Brasilia)

  • Iram Gleria

    ()

    (Institute of Physics, Federal University of Alagoas)

  • Raul Matsushita

    ()

    (Department of Statistics, University of Brasilia)

We find evidence of weak informational efficiency in the Brazilian daily foreign exchange market using Hurst exponents (Hurst 1951, 1955, Feder 1988), which offer an alternative (from statistical physics) to traditional econometric gauges. We show that a trend toward efficiency has been reverted since the crisis of 1999. We also find power laws (Mantegna and Stanley 2000) in means, volatilities, the Hurst exponents, autocorrelation times, and complexity indices of returns for varying time lags.

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File URL: http://www.accessecon.com/pubs/EB/2007/Volume7/EB-06G10032A.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 7 (2007)
Issue (Month): 1 ()
Pages: 1-11

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Handle: RePEc:ebl:ecbull:eb-06g10032
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  1. Gordon R. Richards, 2004. "A fractal forecasting model for financial time series," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(8), pages 586-601.
  2. Katsumi Shimotsu, 2006. "Simple (but effective) tests of long memory versus structural breaks," Working Papers 1101, Queen's University, Department of Economics.
  3. Sergio Da Silva & Guilherme Moura, 2005. "Is There a Brazilian J-Curve?," Economics Bulletin, AccessEcon, vol. 6(10), pages 1-17.
  4. Cajueiro, Daniel O & Tabak, Benjamin M, 2004. "The Hurst exponent over time: testing the assertion that emerging markets are becoming more efficient," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 336(3), pages 521-537.
  5. Lo, Andrew W, 1991. "Long-Term Memory in Stock Market Prices," Econometrica, Econometric Society, vol. 59(5), pages 1279-1313, September.
  6. repec:ebl:ecbull:v:6:y:2005:i:10:p:1-17 is not listed on IDEAS
  7. Laurini, M. P. & Portugal, M. S., 2003. "Long Memory int the R$/US$ Exchange Rate: A Robust Analysis," Finance Lab Working Papers flwp_50, Finance Lab, Insper Instituto de Ensino e Pesquisa.
  8. Couillard, Michel & Davison, Matt, 2005. "A comment on measuring the Hurst exponent of financial time series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 348(C), pages 404-418.
  9. Laurini, M. P. & Portugal, M. S., 2003. "Markov Switching Based Nonlinear Tests for Market Efficiency Using the R$/US$ Exchange Rate," Finance Lab Working Papers flwp_51, Finance Lab, Insper Instituto de Ensino e Pesquisa.
  10. repec:sbe:breart:v:24:y:2004:i:1:a:2705 is not listed on IDEAS
  11. repec:ebl:ecbull:v:7:y:2002:i:3:p:1-12 is not listed on IDEAS
  12. Sergio Da Silva & Raul Matsushita & Iram Gleria, 2002. "Scaling power laws in the Sao Paulo Stock Exchange," Economics Bulletin, AccessEcon, vol. 7(3), pages 1-12.
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