Efficiency of the financial markets during the COVID-19 crisis: Time-varying parameters of fractional stable dynamics
Physica A: Statistical Mechanics and its Applications
; 609, 2023.
Article
in English
| Scopus | ID: covidwho-2238672
ABSTRACT
This paper investigates the impact of COVID-19 on financial markets. It focuses on the evolution of the market efficiency, using two efficiency indicators the Hurst exponent and the memory parameter of a fractional Lévy-stable motion. The second approach combines, in the same model of dynamic, an alpha-stable distribution and a dependence structure between price returns. We provide a dynamic estimation method for the two efficiency indicators. This method introduces a free parameter, the discount factor, which we select so as to get the best alpha-stable density forecasts for observed price returns. The application to stock indices during the COVID-19 crisis shows a strong loss of efficiency for US indices. On the opposite, Asian and Australian indices seem less affected and the inefficiency of these markets during the COVID-19 crisis is even questionable. © 2022 Elsevier B.V.
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Collection:
Databases of international organizations
Database:
Scopus
Language:
English
Journal:
Physica A: Statistical Mechanics and its Applications
Year:
2023
Document Type:
Article
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