Skip to content
GetProfitable
Search
Dictionary

Hurst exponent

A single number summarising whether a series trends, reverts, or wanders. Above 0.5 suggests persistence, below 0.5 suggests reversion, 0.5 is a random walk.

It is estimated from how the dispersion of returns scales with the interval you measure over. For a random-walk, variance grows linearly with time, so the standard deviation grows with the square root, giving H = 0.5. Faster growth implies trending, slower implies reversion.

Typical measured values on liquid markets sit between 0.45 and 0.55 and move around a lot depending on window and method. A reading of 0.58 on a two-year daily sample is not strong evidence of anything, and different estimators applied to the same data can disagree by 0.05 or more.

Use it as a rough regime-filter input or a descriptive statistic, not as a standalone signal. Anyone selling a system based on Hurst alone is selling an estimation artefact.

Related: random-walk, mean-reversion-half-life, regime-filter, variance-ratio-test

Educational only, not advice. Spotted an error? Post in Site Feedback.