The Local Fractal Properties of the Financial Time Series on the Polish Stock Exchange Market

TL;DR

This paper analyzes the local fractal properties of the Warsaw Stock Exchange Index, revealing a relationship between fractal behavior and market crashes, which could aid in understanding financial market dynamics.

Contribution

It introduces a method to analyze local fractal properties of financial time series and links these properties to market crash occurrences.

Findings

Local Hurst exponent varies with market conditions.

Fractal properties correlate with crash periods.

Potential for predicting market instability.

Abstract

We investigate the local fractal properties of the financial time series based on the evolution of the Warsaw Stock Exchange Index (WIG) connected with the largest developing financial market in Europe. Calculating the local Hurst exponent for the WIG time series we find an interesting dependence between the behavior of the local fractal properties of the WIG time series and the crashes appearance on the financial market.