Inefficiency in Latin-American market indices

LUCIANO ZUNINO, BENJAMIN M. TABAK, DARÍO G. PÉREZ, MARIO GARAVAGLIA AND OSVALDO A. ROSSO

EUROPEAN PHYSICAL JOURNAL B - CONDENSED MATTER

Springer/EDP Sciences

Año: 2007 vol. 60 p. 111 - 121

1434-6028

We explore the deviations from efficiency in the returns and volatility returns of Latin-American market indices. Two different approaches are considered. The dynamics of the Hurst exponent is obtained via a wavelet rolling sample approach, quantifying the degree of long memory exhibited by the stock market indices under analysis. On the other hand, the Tsallis $q$ entropic index is measured in order to take into account the deviations from the Gaussian hypothesis. Different dynamic rankings of inefficieny are obtained, each of them contemplates a different source of inefficiency. Comparing with the results obtained for a developed country (US), we confirm a similar degree of long-range dependence for our emerging markets. Moreover, we show that the inefficiency in the Latin-American countries comes principally from the non-Gaussian form of the probability distributions.