How Fama Went Wrong: Measures of Multivariate Kurtosis for the Identification of the Dynamics of a N-Dimensional Market

Tanya Ara\'ujo, Jo\~ao Dias, Samuel Eleut\'erio and Francisco Lou\c{c}\~a

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Abstract: This paper investigates the common intuition suggesting that during crises the shape of the financial market clearly differentiates from that of random walk processes. In this sense, it challenges the analysis of the nature of financial markets proposed by Fama and his associates. For this, a geometric approach is proposed in order to define the patterns of change of the market and a measure of multivariate kurtosis is used in order to test deviations from multinormality. The emergence of crises can be measured in this framework, using all the available information about the returns of the stocks under consideration and not only the index representing the market.

Date: 2012-07
New Economics Papers: this item is included in nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1207.1202

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