Maritime businesses: volatile stock prices and market valuation inefficiencies

Abstract

This paper examines 12 maritime equity price series for behavioral stability and efficient market pricing for the 1989–2002 period. Five self-affine fractal analysis techniques for estimating the Hurst exponent, Mandelbrot–Lévy characteristic exponent, and fractal dimension are employed to explore the price series fractal properties. Techniques employed are rescaled-range analysis, power-spectral density analysis, roughness–length analysis, the variogram or structure function method, and wavelet analysis. Formal hypothesis tests provide evidence of a change in market behavior between the 1989–1994 and 1995–2002 periods. Hypothesis tests also provide evidence against efficient valuation of the maritime businesses sampled, supporting the multifractal model of asset returns (MMAR), and disconfirming the weak form of the Efficient Market Hypothesis (EMH). Strong evidence is presented for antipersistence of some maritime equities in the sample, suggesting market participants habitually overreact to new information, and never learn not to. An important implication of this finding is that financial derivatives based on the sampled equities cannot be efficiently priced.