Investigating efficiency dynamics of the Indian forex market using Hurst exponent and changepoint analysis: impact of financial upheavals

Radhika Prosad Datta

International Journal of Computational Economics and Econometrics, 2025, vol. 15, issue 4, 421-436

Abstract: The foreign exchange (forex) market's efficiency has significant implications for investment decisions, risk management, and economic policies. This paper investigates the efficiency of the Indian forex market during financial upheavals, focusing on the Hurst exponent a measure from fractal theory analysis, as a tool to analyse the self-similarity and predictability of price trends. Using data from four major exchange rates (USD, GBP, EUR and JPY) against the Indian rupee, spanning 2018 to 2021, the study employs the application of the Hurst exponent, and changepoint analysis to assess the forex market's efficiency during financial upheavals, such as the COVID-19 pandemic. The study contributes to the understanding of market efficiency dynamics, offering practical implications for traders, investors, policymakers, and businesses dealing with foreign exchange rates. By bridging theoretical insights with empirical findings, this research aids decision-makers in navigating the complexities of the ever-changing landscape of international finance.

Keywords: exchange rates; Hurst exponent; changepoint; market efficiency; time series. (search for similar items in EconPapers)
Date: 2025
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