There is No Chaos in Stock Markets
14 Pages Posted: 13 Jun 2014
Date Written: June 11, 2014
The elegant simplicity of the Efficient Market Hypothesis (EMH) is its greatest weakness because human nature demands complicated answers to important questions and Chaos Theory readily fills that demand for complexity claiming that it reveals the hidden structure in stock prices. In this paper we take a close look at the Rescaled Range Analysis tool of chaos theorists and show that their findings are undermined by weaknesses in their methods.
Keywords: rescaled range analysis, fractal, chaos theory, statistics, Monte Carlo, stock returns
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