Local Estimation of Stock Market Efficiency

6 Pages Posted: 29 Feb 2012

See all articles by Sergio Bianchi

Sergio Bianchi

University of Cassino

Alexandre Pantanella

University of Cassino

Augusto Pianese

University of Cassino

Date Written: January 27, 2012

Abstract

A dynamical measure is designed to assess the time-changing degree of efficiency of stock markets, under the hypothesis that the price process can be modeled by the Multifractional Processes with Random Exponent (MPRE), a class of stochastic processes recently defined by Ayache and Taqqu (2005) to make the fractional Brownian motion more versatile in describing complex dynamics. The model succeeds in seizing most of the stylized facts well known in quantitative finance and lends itself to frame the questionable notion of (permanent) efficiency into a more realistic dynamical perspective. Our findings show that inefficiency has decidedly grown after the 2007-2009 financial crisis.

Suggested Citation

Bianchi, Sergio and Pantanella, Alexandre and Pianese, Augusto, Local Estimation of Stock Market Efficiency (January 27, 2012). Available at SSRN: https://ssrn.com/abstract=2013084 or http://dx.doi.org/10.2139/ssrn.2013084

Sergio Bianchi (Contact Author)

University of Cassino ( email )

Via S. Angelo - Campus Folcara
Dept. of Economics and Law
Cassino, 03043
Italy
+3907762994846 (Phone)
+390776393034 (Fax)

HOME PAGE: http://www.docente.unicas.it/sergio_bianchi

Alexandre Pantanella

University of Cassino ( email )

Via S. Angelo, Loc. Folcara
Cassino, Frosinone 03043
Italy

Augusto Pianese

University of Cassino ( email )

Via S. Angelo, Loc. Folcara
Cassino, Frosinone 03043
Italy