The chapter questions the applicability of the Efficient Market Hypothesis (EMH) for analysis of financial markets. The overall goal is to analyze methods of forecasting future prices of financial assets based on the concept of the fractal market structure and long-term memory of past prices. Fractals in the financial markets are interpreted either as investors with different investment horizons or as a configuration of the price movement on chart. This chapter examines the fractal structure of financial markets, nonlinear methods of analysis of financial markets, plasticity and long-term memory to long-term investment horizons of financial markets, fractal analysis of financial markets, new approaches to forecast prices of financial assets, which eliminate shortcomings of the linear paradigm.
The chapter is aimed at identification of criteria to select financial assets for investment; observing price fluctuations at small time intervals (up to one week) as possible predictors of the future of a significant increase in the price fluctuations amplitude; determining a fractal dimension of the financial markets on the basis of R/S-analysis; constructing a fractal index indicator to identify a bifurcation point, which gives birth to a possibility of crisis phenomena in economy. Therefore, the practical significance of the chapter lies in the idea of equipping academics and practitioners with new methods and tools for analysis and forecasting future development and dynamics of the financial markets.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.