Trends in Stock Prices and Range to Standard Deviation Ratio

Hurst exponent (H) measured from R/S ratio, is being used as a measure to find predictability of a time series. The larger the H value, the stronger is the trending trait in the time series. In this paper, we estimated R/S ratio of several stock indexes of Indian market for 10 years. Though the overall Hurst exponent values for the selected series were close to 0.5, the value varied widely on period-to-period basis. The analysis of R/S ratio on a smaller window size of 30 trading day revealed a positive relationship between R/S ratio and performance of a moving average based trading rule.