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I believe Hurst Exponent greater than 0.5 indicates persistent series, meaning the values are not mean-reverting. However, when I run a variance ratio test, I get a graph clearly showing mean reverting trend and I don't quite know how to interpret this information. Which one should I believe and why do I get this result?

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  • $\begingroup$ Andrew Lo wrote an article about how the Hurst-Mandelbrot test for lg term dependency could be misleading (false positive) if there is sh term dependency. You will find it as Chapter 6 in his book Non-Random Walk down Wall Street available online. It is quite advanced and I don't remember well the details (I had to read it in school years ago) . $\endgroup$
    – noob2
    Sep 28 '20 at 14:42

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