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Patterns in the Chaos: The Moving Hurst Indicator and Its Role in Indian Market Volatility

Author

Listed:
  • Param Shah

    (Department of Computer Science Engineering, School of Technology, Pandit Deendayal Energy University, Gandhinagar 382426, India)

  • Ankush Raje

    (Department of Mathematics, School of Technology, Pandit Deendayal Energy University, Gandhinagar 382426, India)

  • Jigarkumar Shah

    (Department of Information and Communication Technology, School of Technology, Pandit Deendayal Energy University, Gandhinagar 382426, India)

Abstract

Estimating the impact of volatility in financial markets is challenging due to complex dynamics, including random fluctuations involving white noise and trend components involving brown noise. In this study, we explore the potential of leveraging the chaotic properties of time series data for improved accuracy. Specifically, we introduce a novel trading strategy based on a technical indicator, Moving Hurst (MH). MH utilizes the Hurst exponent which characterizes the chaotic properties of time series. We hypothesize and then prove empirically that MH outperforms traditional indicators like Moving Averages (MA) in analyzing Indian equity indices and capturing profitable trading opportunities while mitigating the impact of volatility.

Suggested Citation

  • Param Shah & Ankush Raje & Jigarkumar Shah, 2024. "Patterns in the Chaos: The Moving Hurst Indicator and Its Role in Indian Market Volatility," JRFM, MDPI, vol. 17(9), pages 1-11, September.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:9:p:390-:d:1470266
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    References listed on IDEAS

    as
    1. Horta, Paulo & Lagoa, Sérgio & Martins, Luís, 2014. "The impact of the 2008 and 2010 financial crises on the Hurst exponents of international stock markets: Implications for efficiency and contagion," International Review of Financial Analysis, Elsevier, vol. 35(C), pages 140-153.
    2. Qadan, Mahmoud & Shuval, Kerem, 2022. "Variance risk and the idiosyncratic volatility puzzle," Finance Research Letters, Elsevier, vol. 45(C).
    Full references (including those not matched with items on IDEAS)

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