Testing Fractal Market Hypothesis (FMH) in Tehran Stock

In this article, we test Fractal Market Hypothesis (FMH) using the daily returns in Tehran Stock Exchange. We estimated Hurst exponent using three approaches such as classic R/S analysis, modified R/S analysis and ARFIMA model. Without removing short term dependencies in returns, we rejected null hypothesis (Efficient Market Hypothesis), but after removing the short-term dependencies using ARMA model, we found that there is no long-term dependencies, fractal structure and persistence in returns. The R/S analysis overestimates the Hurst exponent; so, for determining critical values of testing statistics we used Monte Carlo simulation.