Unifractality and Multifractality in the Italian Stock Market

34 Pages Posted: 13 Oct 2008 Last revised: 17 May 2009

See all articles by John Goddard

John Goddard

Bangor University - Bangor University

Enrico Onali

University of Exeter Business School

Multiple version iconThere are 2 versions of this paper

Date Written: October 9, 2008

Abstract

Tests for the validity of the weak-form EMH in the Italian stock market are presented, based on examination of the fractal properties of the log returns series for the Mibtel index. The random walk hypothesis is evaluated against alternatives accommodating either unifractality or multifractality. Critical values for the test statistics are generated using Monte Carlo simulations of random Gaussian innovations. Evidence is reported of multifractality. Large positive moments of the distributions of returns measured at different frequencies are found to scale at a slower rate than the same moments for random Gaussian innovations, and the departure from random walk behaviour is statistically significant on standard criteria. The observed pattern is attributed primarily to antipersistence affecting large fluctuations in returns, or volatility clustering.

Keywords: Efficient Market Hypothesis, Fractal Market Hypothesis, Italy, Stock market

JEL Classification: C22, G12, G14

Suggested Citation

Goddard, John and Onali, Enrico, Unifractality and Multifractality in the Italian Stock Market (October 9, 2008). Available at SSRN: https://ssrn.com/abstract=1281472 or http://dx.doi.org/10.2139/ssrn.1281472

John Goddard

Bangor University - Bangor University ( email )

Bangor, Wales LL57 2DG
United Kingdom

Enrico Onali (Contact Author)

University of Exeter Business School ( email )

Exeter
United Kingdom

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