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Is the efficiency of stock market correlated with multifractality? An evidence from the Shanghai stock market

  • Gu, Rongbao
  • Shao, Yanmin
  • Wang, Qingnan
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    In this paper, we propose an efficiency index and multifractality degree for financial markets, and investigate the dynamics of the relationship between the two indices for the Shanghai stock market employing the technique of rolling window. By using the DCCA cross-correlation coefficient, we find that, for the Shanghai stock market, the increase in the degree of market multifractality can lead to a lower degree of market efficiency before the equity division reforms, whereas it can result in a lower degree of market efficiency in the short-term and a higher degree of market efficiency in the long-term after the equity division reforms. This finding reflects the process of development of the Shanghai stock market and also provides strong evidence which supports Liu’s argument that the increase in the degree of market complexity can improve the market efficiency Liu (2009) [1].

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    Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

    Volume (Year): 392 (2013)
    Issue (Month): 2 ()
    Pages: 361-370

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    Handle: RePEc:eee:phsmap:v:392:y:2013:i:2:p:361-370
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