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Long-range correlations and nonstationarity in the Brazilian stock market


  • Costa, Rogério L.
  • Vasconcelos, G.L.


We report an empirical study of the Ibovespa index of the São Paulo Stock Exchange in which we detect the existence of long-range correlations. To analyze our data, we introduce a rescaled variant of the usual detrended fluctuation analysis that allows us to obtain the Hurst exponent through a one-parameter fitting. We also compute a time-dependent Hurst exponent H(t) using 3-year moving time windows. In particular, we find that before the launch of the Collor Plan in 1990 the curve H(t) remains, in general, well above 12, while afterwards it stays close to 12. We thus argue that the structural reforms set off by the Collor Plan has lead to a more efficient stock market in Brazil. We also suggest that the time dependence of the Ibovespa Hurst exponent could be described in terms of a multifractional Brownian motion.

Suggested Citation

  • Costa, Rogério L. & Vasconcelos, G.L., 2003. "Long-range correlations and nonstationarity in the Brazilian stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 329(1), pages 231-248.
  • Handle: RePEc:eee:phsmap:v:329:y:2003:i:1:p:231-248 DOI: 10.1016/S0378-4371(03)00607-1

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    References listed on IDEAS

    1. J.L. McCauley & G.h. Gunaratne, 2002. "An empirical model of volatility of returns and option pricing," Computing in Economics and Finance 2002 186, Society for Computational Economics.
    2. Leonard I. Nakamura, 2000. "Economics and the new economy: the invisible hand meets creative destruction," Business Review, Federal Reserve Bank of Philadelphia, issue Jul, pages 15-30.
    3. McCauley, Joseph L. & Gunaratne, Gemunu H., 2003. "An empirical model of volatility of returns and option pricing," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 329(1), pages 178-198.
    4. Gemunu H. Gunaratne & Joseph L. McCauley, 2002. "A theory for Fluctuations in Stock Prices and Valuation of their Options," Papers cond-mat/0209475,
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