Universal Journal of Accounting and Finance Vol. 9(4), pp. 796 - 809
DOI: 10.13189/ujaf.2021.090426
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Market Efficiency Dynamics and Chaotic Behavior of Dhaka Stock Exchange: Evidence from Mutual Information and Lyapunov Exponents Models


Muhammad Enamul Haque 1,*, Andreia Dionísio 2
1 School of Business and Economics, United International University, Bangladesh
2 Department of Management, CEFAGE, University of Evora, Portugal

ABSTRACT

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 behavior- a 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.

KEYWORDS
Market Efficiency, Chaotic Behavior, Mutual Information, Global Correlation, Lyapunov Exponents

Cite This Paper in IEEE or APA Citation Styles
(a). IEEE Format:
[1] Muhammad Enamul Haque , Andreia Dionísio , "Market Efficiency Dynamics and Chaotic Behavior of Dhaka Stock Exchange: Evidence from Mutual Information and Lyapunov Exponents Models," Universal Journal of Accounting and Finance, Vol. 9, No. 4, pp. 796 - 809, 2021. DOI: 10.13189/ujaf.2021.090426.

(b). APA Format:
Muhammad Enamul Haque , Andreia Dionísio (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. DOI: 10.13189/ujaf.2021.090426.