Dynamic analysis of the FTSE20, FTSE40 and FTSE80 returns series of the Athens Stock Exchange market.

Abstract

During the past two decades academic researchers and economic analysts have been increasingly interested in the area of chaotic dynamics. In general it is widely accepted that financial markets are highly complex systems and both deterministic and stochastic descriptions are essential in order to identify main attributes of their dynamics. This paper examines the existence of a deterministic chaotic structure in the stock returns of the Athens Stock Exchange Market and in particular the FTSE20, FTSE 40 and FTSE 80 indeces. The overall result suggests that the returns series do not follow a random walk process. In order to test for chaos the diagnostic tools of correlation dimension and the Largest Lyapunov Exponent were calculated. The results reveal that there is weak but clear evidence of high-dimensional chaotic structure in the ASE high-frequency returns series.