Is Hurst exponent value useful in forecasting financial time series?
We estimated Hurst exponent of twelve stock index series from across the glove using daily values of for past ten years and found that the Hurst exponent value of the full series is around 0.50 confirming market efficiency.
What is Hurst exponent in trading?
The Hurst exponent is a measure for the behaviour of the market. It shows if the market behaves in a random, trending or mean-reversion manner. This can be used to select the right trading strategy for your market.
How do you calculate Hurst exponent?
The Hurst Exponent is estimated by fitting the power-law E[R(n)/S(n)]=C×nH to the data. This is done by taking the logarithm of both sides, and fitting a straight line. The slope of the line gives H (i.e. Hurst Exponent Estimate).
How do you find the Hurst exponent of a time series?
To calculate the Hurst exponent, we first calculate the standard deviation of the differences between a series and its lagged version, for a range of possible lags. We then estimate the Hurst exponent as the slope of the log-log plot of the number of lags versus the mentioned standard deviations.
Can Hurst exponent be greater than 1?
It is used to measure long range dependence in a time series. While the significant Hurst Exponent value is between 0 and 1, it is possible for DFA to produce Hurst Exponent values greater than 1. Hurst values greater than 1 indicate non-stationarity or unsuccessful detrending (Bryce et al., 2001).
What is Hurst cycle analysis?
Hurst cycle analysis provides a road-map of cyclical (recurring) trend changes at all time frames within financial markets. As Hurst cycle clusters (nests of multiple cycles) are arrived at chronologically, a price top or bottom occurs, resulting in a trend change.
What is Hurst phenomenon?
The Hurst phenomenon is a well-known feature of long-range persistence first observed in hydrological and geophysical time series by E. Hurst in the 1950s. It has also been found in several cases in turbulence time series measured in the wind tunnel, the atmosphere, and in rivers.
What is rescaled range analysis?
Rescaled range analysis is a statistical technique used to analyze trends in a time series. It was developed by British hydrologist Harold Edwin Hurst to predict flooding on the Nile river.
How accurate are Hurst cycles?
Hurst’s theory of channel and envelope analysis was the cornerstone of his work, with time cycles and classic trendline analysis used to aid the forecasting techniques. Although likely impossible in today’s markets, Hurst claimed a 90% accuracy in actual trading results with his techniques of cyclical analysis.
What is future line of demarcation?
FLD – Future Line of Demarcation is an important Technical analysis tool that helps us to project price targets, support and resistance points and to understand the underlying trend. Following is the Nifty daily chart showing how the application of FLD helps in determining crucial reversal areas and target points.
How do you calculate Hurst exponent in R?
5 Answers. Hurst exponent, H, can be calculated from fractal dimension, D, as D = 2 – H. I use the fractaldim package, available CRAN, to calculate fractal dimension. There is a complete description of the methodologies in Estimators of Fractal Dimension: Assessing the Roughness of Time Series and Spatial Data.
What is FLD in stock market?
FLD – Future Line of Demarcation is an important Technical analysis tool that helps us to project price targets, support and resistance points and to understand the underlying trend.