Testing the Random Walk Hypothesis for Real Exchange Rates

Climate change, the scarcity of fossil fuels, advances in clean energy, and volatility of crude oil prices have led to the recognition of clean energy as a viable alternative to dirty energy. This paper investigates the multifractal scaling behavior and efficiency of green finance markets, as well as traditional markets such as gold, crude oil, and natural gas between 1 January 2018, and 9 March 2023. To test the serial dependency (autocorrelation) and the efficient market hypothesis, in its weak form, we employed the Lo and Mackinlay test and the DFA method. The empirical findings showed that returns data series exhibit signs of (in)efficiency. Additionally, there is a negative autocorrelation among the crude oil market, the Clean Energy Fuels Index, the Global Clean Energy Index, the gold market, and the natural gas market. Arbitration strategies can be used to obtain abnormal returns, but caution should be exercised as prices may increase above their actual market value and reduce the profitability of trading. This work contributes to the body of knowledge on sustainable finance by teaching investors how to use predictive strategies on the future values of their investments.

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Section: Literature Reviewmentioning

confidence: 99%

Clean Energy Action Index Efficiency: An Analysis in Global Uncertainty Contexts

2023

Self Cite

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“…In such a market, new information is rapidly and completely reflected in pricing, and there is no potential to gain an edge by leveraging already-public information. Because of this, the market is always adjusting to new information, and stock values fluctuate as a result [18][19][20]. EMH (Efficiency Market Hypothesis) also makes the premise that market players are rational and act in their own best interests, in addition to presuming that information available on the market is free of charge.…”

Section: Literature Reviewmentioning

confidence: 99%

Clean Energy Action Index Efficiency: An Analysis in Global Uncertainty Contexts

Dias¹,

Horta²,

Chambino³

2023

Preprint

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Climate change, the scarcity of fossil fuels, technical advances in clean energy, and the volatility of crude oil prices are just a few of the factors that have prompted the world to recognize clean energy as a viable alternative to dirty energy. As part of the Paris Climate Accord of 2015, many countries agreed to change their economies to be more sensitive to climate change. Due to this Accord, which increased interest from investors and decision-makers, investments in clean energy companies have benefited [1,2]. Clean energy stocks, which are a part of the larger world of tradable reserves, might experience pricing inefficiencies. In this paper, we investigate the multifractal scaling behavior and efficiency of green finance markets, as well as traditional markets like gold, crude oil, and natural gas between January 1, 2018, and March 9, 2023, which covers periods of low volatility and financial instability (2020 and 2022 events). To test the serial dependency (autocorrelation) and the efficient market hypothesis, in its weak form, we employed the Lo and Mackinlay test and the DFA method. The empirical findings demonstrated that both periods exhibit severe multifractal and significant asymmetry, indicating that the price indices under study are not at all efficient.

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“…Additionally, the hypothesis of the informational efficiency of the analysed stock markets may be questioned. These findings were verified, by the authors' studies (Dias, Pardal, Santos, and Vasco, 2021;Dias, Heliodoro, Alexandre, Santos, et al, 2021b;Santos et al, 2021;Zebende et al, 2022), which show the presence of autocorrelation, i.e., the existence of long memories in international stock markets. Source: Own elaboration.…”

Section: Resultsmentioning

confidence: 62%

International Scientific Conference EMAN – Economics and Management: How to Cope with Disrupted Times

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The purpose of the annual EMAN conference is to support the power of scientific research and dissemination of the research results with the objective to enhance society by advancing knowledge; policy-making change, lives, and ultimately, the world. Our objective is to continue to be the foremost annual conference on cutting-edge theory and practice of economics, management, law, tourism, environment, technology through encouraging advancement via excellence, and interaction.EMAN conference aims to bring together the international academic community (experts, scientists, engineers, researchers, students, and others) and enable interactive discussions and other forms of interpersonal exchange of experiences and popularization of science and personal and collective affirmation.The annual EMAN conference is committed to the highest standards of publishing integrity and academic honesty ensuring ethics in all its publications. Conformance to standards of ethical behavior is therefore expected of all parties involved: authors, editors, reviewers, and the publisher. The conference organizer follows the Committee on Publication Ethics (COPE) guidelines on how to deal with potential acts of misconduct.All received full papers prior peer review process are subject to plagiarism check with iThenticate by Turnitin software. Any identified plagiarism automatically disqualifies a paper. Afterward, all full papers are double-blind peer-reviewed by the reviewers drawn from the editorial committee or external reviewers depending on the topic, title, and the subject matter of the paper. Peer reviewers provide a critical assessment of the paper and may recommend improvements. Although the author may choose not to take this advice, editors highly recommend that the author address any issues, explaining why their research process or conclusions are correct.

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Testing the Random Walk Hypothesis for Real Exchange Rates

Cited by 6 publications

References 34 publications

Clean Energy Action Index Efficiency: An Analysis in Global Uncertainty Contexts

Clean Energy Action Index Efficiency: An Analysis in Global Uncertainty Contexts

Clean Energy Action Index Efficiency: An Analysis in Global Uncertainty Contexts

International Scientific Conference EMAN – Economics and Management: How to Cope with Disrupted Times

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