Narrow Results

Based on the daily return and volatility series of the Chinese yuan (RMB)/US dollar (USD) exchange rate and the Shanghai Stock Composite Index, the time-varying long memories of the Chinese currency and stock markets are investigated by comprehensively using the rescaled range (R/S), the modified R/S, and the detrended fluctuation analysis methods. According to the results drawn: (1) the efficiency of the Chinese currency market has not improved significantly, whereas the efficiency of the Chinese stock market has improved steadily, (2) volatility series presents longer memory than return series either in the Chinese currency or stock market and (3) the time-varying Hurst exponent of the Chinese currency market is sensitive to the reform that enhances the flexibility of the RMB exchange rate. Moreover, we find that short-term bidirectional Granger causal relationship exists, but no long-run equilibrium relationship between the time-varying Hurst exponents of the Chinese currency and stock markets was found based on the Granger causality and cointegration tests, respectively.

This paper aims to analyze whether the financial crises of the past 20 years have reduced efficiency, in its weak form, in 19 stock markets belonging to the 20 most developed economies (G-20). The sample period comprises the period from 2 January 2000 to 5 February 2021 with the respective financial crises, namely, Dot-com, Argentina, Subprime, Sovereign debt, China stock market crash (2015–2016), UK’s withdrawal from the European Union and the global pandemic of 2020. The results highlight that most markets show signs of (in)efficiency in each sliding window (1000 days), that is, they show asymmetries and non-Gaussian distributions, and ${\alpha }_{\mathrm{\text{DFA}}}\ne 0.5$. These findings suggest that the random walk hypothesis is rejected in certain markets, which has implications for investors, since some returns may be expected, creating arbitrage and abnormal profit opportunities, contrary to the random walk and informational efficiency hypotheses. The results found also open room for market regulators to take steps to ensure better informational data across international financial markets.