Time Series Analysis: Mandelbrot Theory At Work In Economics

The consequences of the Gaussian hypothesis, which leads to the Efficient Market Hypothesis, are investigated in the framework of time teries tnalysis in economics. The validity of an alternative model, based on Mandelbrot theory, is discussed using the Rescaled Range technique. Hurst exponents rela...

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Bibliographic Details
Published inWIT Transactions on Engineering Sciences Vol. 15
Main Authors Guiducci, M F, Loflredo, M I
Format Journal Article
LanguageEnglish
Published Southampton W I T Press 01.01.1997
Subjects
Brownian motion
Chaos theory
Economic analysis
Economic models
Efficient markets
Hypotheses
Markets
Nonlinear systems
Time series
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Summary:The consequences of the Gaussian hypothesis, which leads to the Efficient Market Hypothesis, are investigated in the framework of time teries tnalysis in economics. The validity of an alternative model, based on Mandelbrot theory, is discussed using the Rescaled Range technique. Hurst exponents related to the underlying fractional Brownian motion are evaluated. 1 Introduction Representing time series for financial markets as non-linear dynamical systems with many degrees of freedom, within the framework of the theory of chaos and fractionals, can be traced back to papers published by Mandelbrot [1,2]. Starting from the discrepancy between the natural consequences of the Efficient Market Hypothesis and the real behavior of financial time series, he took into account a wider choice of underlying probability spaces whose
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ISSN:1746-4471
1743-3533
DOI:10.2495/IMS970261