Pré-Publication, Document De Travail Année : 2021

Efficiency of the financial markets during the COVID-19 crisis: time-varying parameters of fractional stable dynamics

Ayoub Ammy-Driss
  • Fonction : Auteur
Matthieu Garcin

Résumé

This paper investigates the impact of COVID-19 on financial markets. It focuses on the evolution of the market efficiency, using two efficiency indicators: the Hurst exponent and the memory parameter of a fractional Lévy-stable motion. The second approach combines, in the same model of dynamic, an alpha-stable distribution and a dependence structure between price returns. We provide a dynamic estimation method for the two efficiency indicators. This method introduces a free parameter, the discount factor, which we select so as to get the best alpha-stable density forecasts for observed price returns. The application to stock indices during the COVID-19 crisis shows a strong loss of efficiency for US indices. On the opposite, Asian and Australian indices seem less affected and the inefficiency of these markets during the COVID-19 crisis is even questionable.

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Dates et versions

hal-02903655 , version 1 (21-07-2020)
hal-02903655 , version 2 (24-03-2021)
hal-02903655 , version 3 (25-11-2021)

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  • HAL Id : hal-02903655 , version 3

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Ayoub Ammy-Driss, Matthieu Garcin. Efficiency of the financial markets during the COVID-19 crisis: time-varying parameters of fractional stable dynamics. 2021. ⟨hal-02903655v3⟩
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