Anomalous Patterns of Market Movements: Detecting a Different Kind of Market Inefficiency

26 Pages Posted: 15 May 2010

See all articles by John R. Doyle

John R. Doyle

Cardiff University - Cardiff Business School

Catherine Huirong Chen

Middlesex University Business School

Date Written: May 12, 2010

Abstract

This paper uses the Overlapping Serial Test (OS-test) to detect anomalous patterns in the distribution of sequences of stock market movements up and down. Our results show that most stock markets exhibit idiosyncratic recurrent patterns, contrary to the efficient market hypothesis. We also use Principal Components Analysis to demonstrate that the kind of inefficiency detected by the OS-test is different from the inefficiencies detected by short memory tests, or by long memory tests commonly used in the literature. This method of analysis could be used by investors to help derive trading strategies.

Keywords: Price Indices, Patterns, Market efficiency, Overlapping Serial Test, Random Number Generators, EMH

JEL Classification: G14, G15

Suggested Citation

Doyle, John and Chen, Catherine Huirong, Anomalous Patterns of Market Movements: Detecting a Different Kind of Market Inefficiency (May 12, 2010). Available at SSRN: https://ssrn.com/abstract=1605111 or http://dx.doi.org/10.2139/ssrn.1605111

John Doyle (Contact Author)

Cardiff University - Cardiff Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom

HOME PAGE: http://www.cardiff.ac.uk/carbs/faculty/doylejr/index.html

Catherine Huirong Chen

Middlesex University Business School ( email )

The Burroughs
London, NW4 4BT
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
213
Abstract Views
1,129
rank
141,882
PlumX Metrics