A new proposal for efficiency quantification of capital markets in the context of complex non-linear dynamics and chaos

Abstract

The main purpose of this paper is efficiency analysis as well as its quantification in the case of emerging capital markets, by building a new measure of market efficiency. The basic assumption of such markets is the lack of correlation between returns, and therefore the existence of low entropy, the lack of randomness, manifestation of fractality and long-term memory, integrated into a single measure, will indicate the distancing from the state of efficient market. This paper proposes five different estimates (for informational entropy, run test, Hurst exponent, long-term correlation coefficient and fractal dimension) to construct a new measure of market efficiency based on a deviation from the ideal state (expressed by the efficient market). The Capital Market Efficiency Exponent is estimated for nine emerging capital markets and, for comparison, for three developed capital markets, at different stages of development over a 16-year time span.

Determinism and Non-linear Behaviour of Log-return and Conditional Volatility: Empirical Analysis for 26 Stock Markets

“…These last findings validate the efficient markets hypothesis (for a details review, the readers can see Barnett and Serletis, 2000). This hypothesis is also more evoked and tested via different methods Borges (2010) and Makovsky (2014), and via fractal dimension Camelia et al (2017) and Kristoufek and Vosvrda (2013). However, the value of correlation dimension do not reach a plateau suggesting the absence of saturation region of correlation dimension due to presence of noise.…”

Empirical study on the efficiency of the stock index futures market from the information and functional perspectives – empirical evidence from China

“…Few studies can help to answer questions about emerging index futures markets, such as that of China (Hou & Li, 2015;Martinez & Tse, 2018;Miao, Ramchander, Wang, & Yang, 2017;Yi & Liang, 2014). In addition, previous studies focus on analysing a single aspect of the effectiveness of the stock index futures market, such as information efficiency (Camelia, Cristina, & Amelia, 2017;Hou & Li, 2015), price discovery (Chen & Tsai, 2017;Martinez & Tse, 2018) and hedging (Dark, 2015).Whereas in this study, we argue that capital market efficiency should include information efficiency and resource allocation efficiency (Samuelson, 2016). Samuelson (2016) stated that information efficiency refers to the ability of timely information absorption reflected in asset prices.…”

Optimal Investment Timing and Scale Choice of Overseas Oil Projects: A Real Option Approach

“…In order to reflect the actual practice of oil projects, characteristics of oil production and tax regimes are considered in this model. However, it is clear that using one model cannot capture the variables that influence optimal investment decision in the uncertain environment [64,65]. This research may have some limitations in application.…”