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For a long time, the efficient market hypothesis plays an important role in financial capital markets. With the time goes by, people found many defects about the efficient market hypothesis, so the fractal market hypothesis occurred. In this study, we take the SME board stock as the research object, aiming to use R/S analysis to determine the characteristics of the SME board stock price movements. Then, we present a trading strategy based on the hurst index of stock, through the actual simulation of the stock market, we get a good return. There is no doubt that the fractal market hypothesis and the hurst index will be a good tool for stock market. Introduction The Efficient Market Hypothesis thinks that the changes of stock price are random, any means to predict the future price based on historical price is invalid. The Fractal Market Hypothesis is a major challenge to the Efficient Market Hypothesis. If the stock market really has long-term memory, then the price will follow certain rules instead of random walk, the analysis of historical data to predict the future price trend will be possible. With the passage of time, the efficient market hypothesis is proved to be unreality, and the fractal market hypothesis have could explain a lot of phenomenon that efficient market hypothesis cannot explain. In fact, the efficient market hypothesis is contained in the fractal market hypothesis,it is a special case of the fractal market hypothesis. Table 1. Difference between EMH and FMH. Characteristic EMH FMH The market characteristics Linear isolated system Nonlinear, open, dissipative system Equilibrium Equilibrium Nonequilibrium System complexity Feedback mechanism Reactions to information Yield sequence Price series Predictability Fluctuation order A simple system No feedback Linear causal relationship White noise, irrelevant Brownian motion (H=0.5) Unpredictable Disorder Complex systems The positive feedback Nonlinear causality Score noise long memory Fractional Brownian motion Prediction is provided Order Fractal is a concept in physics, it was put forward by Hurst (1951), who used R/S analysis to calculate the hurst index. Then Mandelbrot (1968) introduced a concept of fractional Brownian motion. Andrew (1991) proposed a perfect and complement analysis method, hurst index and the fractal market hypothesis widely used over in the stock, such as crude oil market. The later scholars, using the method of predecessors' experience and theory on the UK Mills (1993), Greece Barkoulas Panas (2000) and Athens (2001), Brazil Cavalcante (2002), American Marianietal (2009), European Sensoy&Tabak (2015) analyzed the fractal feature of stock found stock in these areas have long-term memory. Through R/S analysis, Ying Fan (2004), Ying Sun (2016) make the evidence shows that China's stock market does not satisfy the efficient market hypothesis.

The SME Board Stock Price Trend Analysis and Investment Strategy Under the Fractal Market Hypothesis