ASSESSMENT persistent time series hryvnia to the dollar US

Abstract

Contemporary literature suggests that the effective market hypothesis is not substantiated. Instead, it suggests the Fractal Market Hypothesis (FMH). Fractal markets are characterized by long-term memory. The main feature of the fractal market is that the frequency distribution of the indicator looks the same across diffe­ rent investment horizons. In such cases, it is said that for an appropriate indicator, the phenomenon of scale invariance is observed. All daily changes are correlated with all future daily changes, all weekly changes are correlated with all future weekly changes. There is no characteristic time scale, a key characteristic of the time series. The presence of memory in the time series can be characterized by the Hearst indicator. This paper analyzes the hryvnia to US dollar exchange rate for the period 04.06.14-04.01.15. Finding the Hearst index made it possible to conclude that there is or is not long-term memory in this series. The presence of long-term memory indi­ cates that the efficient market hypothesis is unjustified. The hypothesis was tested that the longer the averaging intervals are taken into account in the model, the Hearst's index decreases. The analysis does not have great predictive power, however, it allows to identify the presence or absence of long-term memory in the study process and thus to accept or reject the hypothesis of an effective market. That is, the series under study is persistent, thus demonstrating long-term me­ mory availability. Thus, since persistence is revealed, the hypothesis of an effective market for the exchange rate yield is not confirmed, but instead can be argued for the fractality of the hryvnia / dollar exchange rate yield. Therefore, the application of the proposed approach made it possible to find the Hearst rate for the hryvnia / dollar exchange rate. The value found indicates that the effective market hypothesis is not substantiated for at least such an exchange rate.