Take the 2-minute tour ×
Quantitative Finance Stack Exchange is a question and answer site for finance professionals and academics. It's 100% free, no registration required.

It appears to me that the answer is no, because Hurst exponent measures persistence in terms of autocorrelation, which is a linear measure. So even if a time series of asset returns is driven by nonlinear or chaotic dynamics, the dependence would not be captured by Hurst exponent as long as the ACF isn't significant at any lag.

Is my understanding correct?

share|improve this question
    
The Hurst exponent can be used to distinguish between an AR(1) process and an ARIFMA process. Dependence is more often used contemporaneously. For instance, a t copula could capture the non-linear dependence between two time series. Presumably you could use some sort of t autocopula to do something similar, but I'm skeptical to what benefits you could get from doing that. –  John Sep 10 '12 at 19:48
    
I am more interested in assessing the predictability of time series in univariate settings. For example, if a time series is driven by a deterministic nonlinear dynamic, it can appear totally random if you look at its ACF, even though in fact it's not random at all. From what I understand, the Hurst exponent cannot help to detect the nonlinear predictability in this case, but I just want to see what people's thoughts are. –  ezbentley Sep 10 '12 at 22:06
add comment

Know someone who can answer? Share a link to this question via email, Google+, Twitter, or Facebook.

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Browse other questions tagged or ask your own question.