A WAY TO DETERMINE CHAOTIC BEHAVIOUR IN ROMANIAN STOCK MARKET

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By: Emilian Lucian NEAC┼×U, Marcela Daniela TODONI
JEL: G14, B59, C61, D53, G01
Keywords: Hurst exponent, chaotic behaviour, structural breaks, recurrence analysis

It is difficult to distinguish between multiple random shocks and endogenous informational inflow in nonlinear systems which show complex dynamics. For this reason, we run the chaos tests to investigate the presence of chaotic phenomena using: nonlinearity tests, Recurrence Plot (RP) and Recurrence Quantification Analysis (RQA).
In this paper, we compute the Hurst Exponent using R/S analysis on Romanian capital market for a time span between 2005 - 2014 daily data. Substantial changes of Hurst Exponent behaviour in the current period compared to the previous one may be seen as structural break points in the series.
The goal of this paper is to determine time series chaotic behaviour in order to highlight the efficiency levels of CEE markets. Also, we aim to investigate the changes in drifting dynamical systems, to examine the recurring patterns – the most important features of complex systems and to admire the "simple beauty of the complexity".