Dynamic efficiency of European credit sectors: A rolling-window multifractal detrended fluctuation analysis

Abstract

In this paper, we explore the market efficiency hypothesis for 22 European credit market sectors using the multi fractal detrended fluctuation approach (MF-DFA). The market efficiency of the credit market sectors is compare in short- and long-run horizons and for small and large fluctuations. The time-variations in the market efficiency level are captured by adopting a rolling-window framework of MF-DFA. We find that all the Eurozone credit market sectors are multifractal in nature and that credit sectors are marked by a persistent long memory phenomenon in their short- and long-term components. Furthermore, market efficiency levels are time-varying for both short- and long-term horizons and significantly change under crisis and non-crisis scenarios. Our findings render the generally adopted full sample MF-DFA results less reliable.