Search Results (172)

Background: Lyapunov exponent has been used in many science and engineering problems to quantify chaos in systems and understand their nonlinear dynamics. In financial engineering and forecasting, evaluation of chaos in financial data helps determine whether the data are predictable and if profits can be generated. The purpose of this study is to examine presence of chaos in cryptocurrency markets. Methods: To examine chaos, Lyapunov exponent is computed from a set of 50 cryptocurrencies and statistical one-sided and two-sided Student-t tests are performed to check if on average the computed Lyapunov exponents are equal, less, or larger than zero. Results: The statistical results reveal strong evidence that prices, returns, and trading volume changes are all chaotic; hence, they show nonlinear and deterministic characteristics. Conclusions: Prices, returns, and trading volume changes in cryptocurrencies could be predicted in the short run; for instance, on a daily basis. In this regard, active traders and investors may implement predictive systems to generate daily profits. Full article

This study investigates time-varying market efficiency and cross-market correlations in cryptocurrency markets across South Korea, the United States, and Japan. Using rolling-window multifractal detrended fluctuation analysis (MF-DFA) and dynamic conditional correlation–generalized autoregressive conditional heteroskedasticity (DCC-GARCH), we analyze 11 cryptocurrency–fiat pairs—Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), and Bitcoin Cash (BCH) denominated in Korean Won (KRW), US Dollar (USD), and Japanese Yen (JPY)—from January 2018 to September 2025. MF-DFA results confirm persistent multifractality and significant time-variation in market efficiency across all markets, consistent with the Adaptive Market Hypothesis (AMH). DCC-GARCH estimates reveal a structural divergence between return integration and efficiency correlations: return-based correlations for same-asset cross-fiat pairs are exceptionally high (mean dynamic conditional correlation of approximately 0.96–0.98), whereas efficiency-based correlations are far more heterogeneous, with cross-asset pairs approaching near-zero synchronization. We interpret the Kimchi Premium as a product of institutional frictions that impede price-level arbitrage while leaving volatility transmission largely unaffected. These findings suggest that cryptocurrency market integration is multidimensional—globally synchronized in risk dynamics, yet locally segmented in the structural quality of information processing. Full article

Assessing electricity market efficiency is important for power market reform and the development of sustainable power systems. Efficient prices can improve resource allocation and provide better signals for system operation, system flexibility and low-carbon transition. Against this background, this study examines the efficiency of three representative provincial electricity spot markets in China, Shandong, Shanxi and Guangdong, using day-ahead and real-time price data from January 2022 to August 2024. A multi-method framework including unit root tests, price convergence tests, detrended fluctuation analysis and sample entropy is employed to evaluate market efficiency and compare differences across provinces. The results show that none of the three markets satisfies the weak-form Efficient Market Hypothesis. The fractal analysis and entropy results further suggest that market efficiency remains limited. Cross-provincial differences are nevertheless observed, which may be partly related to intraday load patterns, generation mix, market structure, and market design. This study provides useful evidence for deepening electricity market reform, as well as promoting the efficient and sustainable development of power systems. Full article

This paper studies the effects of leasing on credit risk and access to credit. The repossession of a leased asset is generally easier than the enforcement of collateral associated with securing a standard loan agreement. We argue that this greater efficiency in enforcement mitigates, ceteris paribus, the counterparty’s moral hazard. To test this hypothesis, we developed a credit rationing model in which income is privately observed and non-verifiable, and financial intermediaries share credit risk information about borrowers. Financial contracts that are more rapidly enforced, such as in leasing, enable the screening of relatively safer projects or credit rationing reduction. We provide empirical evidence consistent with this prediction for the Italian credit market and considerations for the effects of monetary policy variables on the model’s equilibrium. Full article

What drives persistent urban–rural tourism satisfaction gaps: whether from promotional over-promising or structural service deficits? This distinction fundamentally determines whether territorial development resources should target marketing sophistication or productive capacity, yet remains empirically unresolved. Text-mining for 33,174 attractions across 349 Chinese cities reveals that both rural and urban destinations systematically under-promise, with description sentiment falling consistently below actual ratings, contradicting the “digital facade” hypothesis. Urban attractions nonetheless generate more positive surprises through superior service delivery (gap = 0.62 vs. 0.55). Sentiment measurement robustness is validated through triangulation of two independent dictionary-based methods ($r=0.58$, $p<0.001$) and cross-paradigm verification using a pre-trained BERT transformer ($\tau =1.000$ ranking stability). SHAP decomposition quantifies the policy implication: controllable service quality indicators, including description quality (23.2%), information richness (30.7%), and price positioning (16.5%), collectively explain over 70% of the variance in satisfaction, while fixed geographic factors (rural classification 14.9% and city-tier 14.7%) account for 29.6%, yielding a controllable-to-geographic ratio of 2.4:1. Propensity score matching with six covariates confirms a 0.074–0.100-point rural penalty persists after controlling for confounders, while non-linear analysis demonstrates that rural attractions face no marginal productivity disadvantage, and the challenge is baseline capacity, not investment efficiency. For policymakers pursuing Sustainable Development Goals 8, 10, and 12 through tourism-led regional strategies, these results mandate redirecting resources from demand-side expectation management toward supply-side infrastructure and workforce development, the true binding constraint on rural competitiveness. Full article

This study offers a comprehensive assessment of financial market modeling through a PRISMA-based systematic review, bibliometric analysis, and content synthesis. We examined 67 review articles (1990–2024) from Web of Science to build a conceptual framework, and 4982 articles (1990–2024) were analyzed with Biblioshiny. Five main clusters emerge: AI and deep learning for prediction; hybrid models that combine traditional and computational approaches; theoretical foundations, including the Efficient Market Hypothesis and critiques; high-frequency prediction and volatility analysis; and modeling of cryptocurrencies and digital assets. Temporal patterns show a shift from traditional econometrics to hybrid and deep learning methods, heightened attention to uncertainty and volatility during crises, rapid growth in crypto-focused modeling, and increased use of sentiment/news data after 2017. The content analysis highlights key gaps and future directions: standardized open benchmarks and reproducible frameworks; regime-sensitive validation; interpretable hybrid models that merge econometric structure with machine-learning flexibility; and wider applicability across assets, markets, and data types. The study provides a structured guide to intellectual and applied modeling, supporting future advances in forecasting, risk management, and policy design. Full article

Behavioral finance theory predicts that Processing Fluency—the subjective ease of parsing a nominal stimulus—should systematically influence investor attention and asset pricing through heuristic-based decision making. Yet modern equity markets, increasingly dominated by High-Frequency Trading (HFT) and algorithmic execution, provide powerful near-instantaneous arbitrage forces that should neutralize any pricing premium arising from superficial nominal cues. Whether cognitive biases such as the “Ticker Fluency” effect and the “Alphabet Effect” persist in this algorithmic environment or have been fully arbitraged away remains an open empirical question with direct implications for the boundary conditions of Processing Fluency Theory. We address this gap by applying a deterministic Heuristic Fluency Score—based on vowel density and consonant cluster penalties—to all 492 S&P 500 constituents over 752 trading days (January 2021–January 2024), estimating individual stock Fama-French 3-Factor Alphas via daily time-series regressions, and testing whether fluency or alphabetical rank explains cross-sectional variation in abnormal returns after controlling for Liquidity, Amihud illiquidity, and GICS Sector Fixed Effects. To guard against Selection Bias, we explicitly contrast a biased illustrative case study ($N=25$, 2019–2024) against the rigorous full-market analysis. We find no statistically or economically significant effect: the Fluency Score coefficient is $\beta =0.0036$ ($p=0.495$) and the Alphabet Rank coefficient is $\beta =-0.0027$ ($p=0.642$), with the results robust to all tested parameterizations ($\lambda \in [0.05,0.20]$; $p>0.50$ throughout). These findings establish a boundary condition of Processing Fluency Theory: in algorithm-dominated, highly liquid large-cap markets, cognitive biases in nominal cues are fully absorbed by arbitrage, and ticker symbols function as neutral identifiers rather than heuristic signals. Residual effects, if any, are more likely to manifest in attention-based or volume-related outcomes, or in less institutionalized market segments where algorithmic participation is lower. Full article

The COVID-19 pandemic constitutes one of the most significant exogenous shocks to global financial markets in recent history, raising questions about the robustness of market efficiency under extreme uncertainty. This study examines whether the pandemic affected the weak-form efficiency of the Bitcoin market or merely heightened volatility without introducing return predictability. Using daily Bitcoin log returns from January 2013 to February 2026, the analysis first evaluates weak-form market efficiency through the Variance Ratio (VR) test. The VR statistics remain close to unity across multiple holding horizons, and the null hypothesis of a random walk cannot be rejected, indicating that daily Bitcoin returns are consistent with weak-form efficiency. Building on this baseline, an Interrupted Time Series (ITS) framework is employed to assess whether the onset of the COVID-19 pandemic in March 2020 led to structural changes in Bitcoin return dynamics. The ITS results reveal no statistically significant changes in level or slope following the outbreak. To further account for autoregressive and moving-average dynamics while explicitly modelling the intervention, an ARIMAX (0, 0, 7) model with COVID-19 intervention variables is estimated. Both the pandemic dummy and its interaction term are statistically insignificant, indicating no material change in the return-generating process after controlling for serial dependence. The moving-average structure indicates that shocks dissipate over approximately one trading week, consistent with weekly trading cycles and liquidity patterns in cryptocurrency markets rather than persistent return predictability. Diagnostic checks, including the Ljung–Box and Shapiro–Wilk tests, confirm the absence of residual autocorrelation and support the model’s white-noise properties. Although volatility increased during the pandemic period, daily Bitcoin returns continued to align with weak-form market efficiency. The evidence, therefore, suggests that COVID-19 served as a stressor without generating persistent inefficiencies. These findings reinforce the distinction between volatility and predictability, demonstrating that heightened uncertainty does not necessarily undermine informational efficiency. Full article

Stock market efficiency plays a vital role in financial economics, as it reflects how quickly and accurately asset prices incorporate available information. This study investigates stock market efficiency and banking sector stability in the MENA region, focusing on the dynamic interactions between macroeconomic indicators, financial depth, and bank-specific variables. Using panel data from 21 countries over the period 2003–2021, the analysis employs both fixed-effects regression and a Panel Vector Autoregression (PVAR) framework to capture cross-country heterogeneity, temporal dynamics, and systemic interdependencies. The findings reveal that traditional macroeconomic variables, including inflation, GDP per capita, and domestic credit to the private sector, exert limited direct influence on banking sector stability as measured by the Z-score. Instead, the results highlight the importance of country-specific characteristics, institutional quality, and regulatory frameworks in shaping financial resilience across MENA countries. Overall, the findings confirm that effective risk management plays a central role in strengthening bank stability. By enhancing financial resilience, improving operational discipline, and reducing vulnerability to economic and financial shocks, sound risk management practices support the ability of banks to maintain consistent performance over time. The results further suggest that stability is not solely driven by internal mechanisms but also depends on the broader economic and institutional environment in which banks operate. Together, these elements reinforce the capacity of banking systems to contribute to long-term financial stability in the region. Full article

This study revisits the Efficient Markets Hypothesis by employing a GRU-D neural network to predict stock return distributions across global equity markets, accounting for missing and irregular data. It examines whether stock returns exhibit statistically significant departures from purely random behavior. By combining price, technical and fundamental inputs, it tests both weak and semi-strong market efficiency. We implement the GRU-D model on a global dataset of stock returns, where daily returns are classified into quartiles. Model performance is assessed using Micro-Average Area Under the Curve (AUC) and Relative Classifier Information (RCI). Robustness checks include sub-sample tests across countries and sectors, an examination of the COVID-19 sub-period, and a price-memory persistence analysis. The results reveal that the GRU-D model achieves a ranking accuracy of approximately 75% when classifying returns, with statistical significance at the 99.99% confidence level, and exhibits modest but robust deviations from strict market efficiency. These deviations persist for up to 200 trading days. Notably, the findings indicate that the GRU-D model is more robust during the COVID-19 period. These findings are consistent with the Adaptive Markets Hypothesis and underscore the relevance of machine-learning frameworks, particularly those designed for imperfect data environments, for identifying time-varying departures from strict market efficiency in global equity markets. Full article

We test price efficiency, which shows the fairness of trading for retail investors using the runs tests and variance ratio tests. We reject the hypothesis that Bitcoin prices are price efficient on most markets, but efficient on the Bitstamp BTC/USD. Coinbase departs from efficiency, indicating that fraud, later found by regulators, has significantly harmed retail investors. We also document barriers to trading of Bitcoin, which result in difficulties in arbitrage despite global price differences. My results predict the hack of the Bitfinex exchange, which caused it to close and harmed many people. Full article

In emerging markets, stock markets play a crucial role in supporting long-term growth. This study explores the causal relationship between stock market development and economic growth in the Fragile Five countries—Brazil, India, Indonesia, South Africa, and Turkey—covering the period from 2001 to 2024. To ensure robust findings, it uses second-generation panel cointegration and causality tests that account for cross-sectional dependence and structural heterogeneity. The model includes three parameters representing financial depth, liquidity, and efficiency. Results indicate significant long-term cointegration, suggesting causality from stock market development to economic growth, supporting the supply-led growth hypothesis. This aligns with recent evidence highlighting the importance of institutional quality and sectoral interconnectedness in emerging markets. Furthermore, Panel DOLS and FMOLS analyses reveal that stock market capitalization has a notable positive effect on domestic productivity. Overall, these findings underscore that stock market parameters are vital for accurate economic forecasting and that strengthening capital markets is essential for sustainable growth in the Fragile Five. Full article

We investigate whether sophisticated deep learning architectures justify their computational cost for short-term cryptocurrency price forecasting. Our study evaluates a 2.1M-parameter (M represents millions (e.g., 2.1M = 2,100,000 parameters), with all RMSE values reported in USD) wavelet-enhanced transformer that decomposes the Fear and Greed Index (FGI) into multiple timescales before integrating these signals with technical indicators. Using Diebold–Mariano tests with HAC-corrected variance, we find that all models—including our wavelet–transformer, ARIMA, XGBoost, LSTM, and vanilla Transformer—fail to significantly outperform the O(1) naive persistence baseline at the 1-day horizon (DM statistic = +19.13, $p<0.001$, naive preferred). Our model achieves an RMSE of USD 2005 versus USD 1986 for naive (ratio 1.010), requiring 3909× more inference time (2.43 ms vs. 0.0006 ms) for a statistically worse performance. These results provide strong empirical support for the Efficient Market Hypothesis in cryptocurrency markets: even sophisticated multi-scale architectures combining wavelet decomposition, cross-attention, and auxiliary technical indicators cannot extract profitable short-term signals. Through systematic ablation, we identify positional encoding as the only critical architectural component—its removal causes 30% RMSE degradation. Our findings carry important implications, as follows: (1) short-term crypto forecasting faces fundamental predictability limits, (2) architectural complexity provides negative ROI in efficient markets, and (3) rigorous statistical validation reveals that apparent improvements often represent noise rather than signal. Full article

In the context of tightening sustainability regulations and rising demands for transparent and responsible capital allocation, understanding how digital financial innovations influence market efficiency has become increasingly important. This study examines the impact of Financial Technology (FinTech) solutions and crowdfunding platforms on sustainable market efficiency, volatility dynamics, and risk structures in the United Kingdom. Using weekly data for the Financial Times Stock Exchange 100 (FTSE 100) index from January 2010 to June 2025, the analysis applies the Lo–MacKinlay variance ratio test to assess compliance with the Random Walk Hypothesis as a proxy for informational efficiency. Firm-level proxies for FinTech and crowdfunding activity are constructed using the Nomenclature of Economic Activities (NACE) and Standard Industrial Classification (SIC) systems. The empirical results indicate substantial deviations from random-walk behavior in crowdfunding-related market segments, where persistent positive autocorrelation and elevated volatility reflect liquidity constraints and informational frictions. By contrast, FinTech-dominated segments display milder inefficiencies and faster information absorption, pointing to more stable price-adjustment mechanisms. After controlling for structural distortions through heteroskedasticity-consistent corrections and volatility adjustments, variance ratios converge toward unity, suggesting a restoration of informational efficiency. The results provide relevant insights for investors, regulators, and policymakers seeking to align financial innovation with the objectives of sustainable financial systems. Full article

We investigate the profitability of systematic sector rotation strategies in the Canadian equity market using TSX 60 constituents (2000–2025). Testing 72 distinct strategies across three theoretical frameworks—momentum, mean-reversion, and balanced approaches—with varying rebalancing frequencies, we identify that median-performer selection combined with quarterly rebalancing generates statistically significant risk-adjusted returns (Sharpe ratio 0.922 versus 0.624 for equal-weighted buy-and-hold). Our primary contributions include rigorous out-of-sample validation, demonstrating performance persistence from 2020 to 2025, machine learning regime classification with 72.7% accuracy, and a comprehensive transaction cost analysis. Results support intermediate-horizon mean reversion in sector returns and challenge strict efficient market hypothesis interpretations in concentrated markets. Findings inform tactical asset allocation practices and contribute to the momentum-reversal literature by documenting conditions under which rotation strategies generate economically meaningful alpha. Full article