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Can One Make Any Crash Prediction in Finance Using the Local Hurst Exponent Idea?

Author

Listed:
  • D. Grech

    (Inst. Ther. Phys. Wroclaw Univ.)

  • Z. Mazur

    (Inst. Exper.Phys. Wroclaw Univ.)

Abstract

We apply the Hurst exponent idea for investigation of DJIA index time-series data. The behavior of the local Hurst exponent prior to drastic changes in financial series signal is analyzed. The optimal length of the time-window over which this exponent can be calculated in order to make some meaningful predictions is discussed. Our prediction hypothesis is verified with examples of '29 and '87 crashes, as well as with more recent phenomena in stock market from the period 1995-2003.Some interesting agreements are found.

Suggested Citation

  • D. Grech & Z. Mazur, 2003. "Can One Make Any Crash Prediction in Finance Using the Local Hurst Exponent Idea?," Papers cond-mat/0311627, arXiv.org.
    • Handle: RePEc:arx:papers:cond-mat/0311627
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    Cited by:

    1. Pavel Srbek, 2018. "Odhad Hurstova exponentu v časových řadách denních výnosů akciových indexů [Estimation of the Hurst Exponent in Time Series of Daily Returns of Stock Indices]," Politická ekonomie, Prague University of Economics and Business, vol. 2018(4), pages 508-524.
    2. Ludwig O. Dittrich & Pavel Srbek, 2020. "Is Violation of the Random Walk Assumption an Exception or a Rule in Capital Markets?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 48(4), pages 491-501, December.

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