Fractal Market Hypothesis: An In-Depth Review

Murari Ambati

No rx3vj_v1, OSF Preprints from Center for Open Science

Abstract: The Fractal Market Hypothesis (FMH) proposes that financial markets have fractal behaviors. Fractal behaviors are patterns that are primarily characterized by self-similarity. Furthermore, there are other methods to characterize fractal behaviors by checking long-range dependencies and for a non-linear structure. Thus, this paper showcases the theoretical and mathematical foundations of FMH. There is a significant focus on FMHs applications to financial markets. Furthermore, this includes focusing on volatility, market crashes, and long-range dependencies. The paper analyzes using fractal geometry, multifractal models, statistical tools, fractal dimension, and power-law distributions to model financial time series. This paper also compares FMH with classical market theories like the Efficient Market Hypothesis (EMH). We then highlight FMH’s capacity to describe real-world market phenomena better.

Date: 2025-02-21
New Economics Papers: this item is included in nep-fmk, nep-hme and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:rx3vj_v1

DOI: 10.31219/osf.io/rx3vj_v1

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