EVALUATION OF LONG-TERM MEMORY IN COLOMBIAN STOCK MARKET BY HURST COEFFICIENT, EVALUACION DE LA MEMORIA DE LARGO PLAZO DEL MERCADO BURSATIL COLOMBIANO MEDIANTE EL COEFICIENTE DE HURST

Juan Benjamin Duarte Duarte, Katherine Julieth Sierra Suarez and Juan Manuel Mascarenas Perez-Inigo

Revista Internacional Administracion & Finanzas, 2014, vol. 7, issue 4, 1-10

Abstract: The efficient market hypothesis states that financial asset returns follow a random walk and depend on the information made available to the market instantly, therefore they can not be predicted. On the other hand, the Fractal market hypothesis says that prices depend of each behavior investor and his investment horizon, producing chaotic behavior in the markets. This paper tests the existence of chaotic behavior in major financial series of the Colombian stock market using the Hurst coefficient, whose estimation can be affected by autocorrelation. Therefore, the first part of the methodology focuses on removing the autocorrelations by ARIMA and GARCH filters, while the second part corresponds to the detectection of behavior by calculating the Hurst coefficient. The results reveal that the Colombian financial assets are persistent.

Keywords: Chaos Theory; EMH; FMH; GARCH; ARIMA (search for similar items in EconPapers)
JEL-codes: C01 C22 D52 G14 (search for similar items in EconPapers)
Date: 2014
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