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

Rongbao Gu, Yanmin Shao and Qingnan Wang

Physica A: Statistical Mechanics and its Applications, 2013, vol. 392, issue 2, 361-370

Abstract: 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].

Keywords: Stock market; Efficiency index; Multifractality degree; DCCA cross-correlation coefficient (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:392:y:2013:i:2:p:361-370

DOI: 10.1016/j.physa.2012.09.008

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