Market Efficiency Dynamics and Chaotic Behavior of Dhaka Stock Exchange: Evidence from Mutual Information and Lyapunov Exponents Models

• Autor(a) principal: Haque, Muhammad Enamul
• Data de Publicação: 2021
• Outros Autores: Dionísio, Andreia
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10174/30344; https://doi.org/Haque, M.E. e Dionísio, A. (2021). Market Efficiency Dynamics and Chaotic Behavior of Dhaka Stock Exchange: Evidence from Mutual Information and Lyapunov Exponents Models. Universal Journal of Accounting and Finance, 9(4): 796-809. https://doi.org/10.13189/ujaf.2021.090426; https://doi.org/10.13189/ujaf.2021.090426
• topic: Market Efficiency; Chaotic Behavior; Mutual Information; Global Correlation; Lyapunov Exponents

This study investigates the evidence of market efficiency dynamics and chaotic behavior of the Dhaka Stock Exchange benchmark index (DSEX) over the 2000-2020 period. We employed the newly developed model of mutual informational and global correlation coefficient in addition to the traditional linear and nonlinear techniques. Results suggest there is evidence of serial dependence in the DSEX returns. We attempted the Lyapunov exponent model to evaluate the possibility of chaos and nonlinear dynamics in the market. The results conspicuously represent the existence of chaotic behaviora nonlinearity-based profitability pattern revealed in the DSEX return series in its short run behavior. By applying two technical trading indicators, we justify the predicting trend of the Bangladesh stock market and conclude that investors active in the Dhaka Stock Exchange can earn abnormal returns. Findings have practical implications for general investors and professional fund managers to exploit the profitable opportunities and reshuffle the investment decisions. Results also convey the message to the regulatory body to initiate the strategies for intervening in the operating mechanisms to reduce the market inefficiency.