Joseph Effect

DEFINITION of 'Joseph Effect'

The idea that movements in a time series tend to be part of larger trends and cycles more often than they are completely random. The Joseph Effect is quantified by the Hurst component, where movements fall between a Hurst range of 0 to 1. The term was coined by Benoit Mandelbrot.

BREAKING DOWN 'Joseph Effect'

If a series of movements is calculated to be between 0 and 0.5 in the Hurst range, then the movement is larger and more random than what are thought to be normal random movements. If the measure is 0.5, then the movements are thought to be random movements. If it is between 0.5 and 1, the movements are thought to be part of a long-term trend. The term "Joseph Effect" alludes to an Old Testament story about Joseph, where Egypt would experience seven years of feast followed by seven years of famine.

RELATED TERMS
  1. Random Factor Analysis

    A statistical analysis performed to determine the origin of random ...
  2. Random Walk Theory

    The theory that stock price changes have the same distribution ...
  3. Data Smoothing

    The use of an algorithm to remove noise from a data set, allowing ...
  4. Technical Rally

    An upward movement in a security's price following a declining ...
  5. Rescaled Range Analysis

    A statistical analysis of a time-series of financial data that ...
  6. Random Variable

    A variable whose value is unknown or a function that assigns ...
Related Articles
  1. Fundamental Analysis

    Financial Markets: Random, Cyclical Or Both?

    Are the markets random or cyclical? It depends on who you ask. Here, we go over both sides of the argument.
  2. Investing Basics

    Understanding the Random Walk Theory

    The random walk theory states stock prices are independent of other factors, so their past movements cannot predict their future.
  3. Options & Futures

    Financial Concepts: Random Walk Theory

    Random walk theory gained popularity in 1973 when Burton Malkiel wrote "A Random Walk Down Wall Street", a book that is now regarded as an investment classic. Random walk is a stock market theory ...
  4. Investing Basics

    R-Squared

    Learn more about this statistical measurement used to represent movement between a security and its benchmark.
  5. Active Trading

    Random Reinforcement: Why Most Traders Fail

    This phenomenon can cause a trader to abandon a proven strategy or risk everything on chance. Find out how to avoid it.
  6. Fundamental Analysis

    Understanding the Simple Random Sample

    A simple random sample is a subset of a statistical population in which each member of the subset has an equal probability of being chosen.
  7. Investing

    Candlestick Charts

    Learn more about this common visualization of a stock's price movement most often used by technical analysts.
  8. Active Trading

    Viewing The Market As Organized Chaos

    Find out how a cat and a ladybug prove markets are both random and efficient.
  9. Charts & Patterns

    (Un)Mapping the Trend

    Much has been said about using trend analysis to gauge the market, but what do we really know about the concept "trend"?
  10. Investing Basics

    What Are The Odds Of Scoring A Winning Trade?

    Just because you're on a winning streak doesn't mean you're a skilled trader. Find out why.
RELATED FAQS
  1. What is the "random walk theory" and what does it mean for investors?

    The random walk theory is the occurrence of an event determined by a series of random movements - in other words, events ... Read Answer >>
  2. Why is the Ease Of Movement Indicator important for traders and analysts?

    Read more about the ease of movement indicator, a technical momentum oscillator created by Richard Arms to track price changes ... Read Answer >>
  3. What are the best technical indicators to complement the Ease Of Movement Indicator?

    Find out what kinds of technical indicators and oscillators make the most beneficial confirmation tools when used with the ... Read Answer >>
  4. How do I use the Ease Of Movement Indicator to create a forex trading strategy?

    Discover how forex traders can apply the ease of movement indicator with currency pairs to and highlight how sensitive price ... Read Answer >>
  5. What is a common strategy traders implement when using the Ease Of Movement Indicator?

    Read about some common strategies that traders can implement to make the most of out the ease of movement indicator developed ... Read Answer >>
  6. What does it mean when there is "price action"?

    Price action refers to the day-to-day fluctuation in the price of an asset. Traders gauge a stock's price action by monitoring ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center