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A multifractal approach for stock market inefficiency

Author

Listed:
  • Zunino, L.
  • Tabak, B.M.
  • Figliola, A.
  • Pérez, D.G.
  • Garavaglia, M.
  • Rosso, O.A.

Abstract

In this paper, the multifractality degree in a collection of developed and emerging stock market indices is evaluated. Empirical results suggest that the multifractality degree can be used as a quantifier to characterize the stage of market development of world stock indices. We develop a model to test the relationship between the stage of market development and the multifractality degree and find robust evidence that the relationship is negative, i.e., higher multifractality is associated with a less developed market. Thus, an inefficiency ranking can be derived from multifractal analysis. Finally, a link with previous volatility time series results is established.

Suggested Citation

  • Zunino, L. & Tabak, B.M. & Figliola, A. & Pérez, D.G. & Garavaglia, M. & Rosso, O.A., 2008. "A multifractal approach for stock market inefficiency," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(26), pages 6558-6566.
  • Handle: RePEc:eee:phsmap:v:387:y:2008:i:26:p:6558-6566
    DOI: 10.1016/j.physa.2008.08.028
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