The Hurst exponent over time: testing the assertion that emerging markets are becoming more efficient

This paper is concerned with the assertion found in the financial literature that emerging markets are becoming more efficient over time. To verify whether this assertion is true or not, we propose the calculation of the Hurst exponent over time using a time window with 4 years of data. The data used here comprises the bulk of emerging markets for Latin America and Asia. Our empirical results show that this assertion seems to be true for most countries, but it does not hold for countries such as Brazil, The Philippines and Thailand. Moreover, in order to check whether or not these results depend on the short term memory and the volatility of returns common in such financial asset return data, we filter the data by an AR-GARCH procedure and present the Hurst exponents for this filtered data. (C) 2003 Elsevier B.V. All rights reserved.