Kristoufek, L. & Vosvrda, M.: Measuring capital market efficiency: Global and local correlations structure
| Author(s): | prof. PhDr. Ladislav Krištoufek Ph.D., prof. Ing. Miloslav Vošvrda CSc., |
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| Type: | Articles in journals with impact factor |
| Year: | 2013 |
| Number: | 0 |
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| Published in: | Physica A: Statistical Mechanics and its Applications 392(1), pp. 184-193 arXiv PDF |
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| Keywords: | Capital market efficiency, Long-range dependence, Short-range dependence, Fractal dimension |
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| Grants: | DYME – Dynamic Models in Economics |
| Abstract: | We introduce a new measure for capital market efficiency. The measure takes into consideration the correlation structure of the returns (long-term and short-term memory) and local herding behavior (fractal dimension). The efficiency measure is taken as a distance from an ideal efficient market situation. The proposed methodology is applied to a portfolio of 41 stock indices. We find that the Japanese NIKKEI is the most efficient market. From a geographical point of view, the more efficient markets are dominated by the European stock indices and the less efficient markets cover mainly Latin America, Asia and Oceania. The inefficiency is mainly driven by a local herding, i.e. a low fractal dimension. |
