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True and apparent scaling: the proximity of the markov- switching multifractal model to long-range dependence

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Liu, Ruipeng, Di Matteo, T. and Lux, Thomas (2007) True and apparent scaling: the proximity of the markov- switching multifractal model to long-range dependence. Working Paper. Coventry: Warwick Business School, Financial Econometrics Research Centre. Working papers (Warwick Business School. Financial Econometrics Research Centre) (No.07-).

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Abstract

In this paper, we consider daily financial data of a collection of different stock market indices, exchange rates, and interest rates, and we analyze their multi-scaling properties by estimating a simple specification of the Markov-switching multifractal model (MSM). In order to see how well the estimated models capture the temporal dependence of the data, we estimate and compare the scaling exponents H(q) (for q = 1, 2) for both empirical data and simulated data of the estimated MSM models. In most cases the multifractal model appears to generate ‘apparent’ long memory in agreement with the empirical scaling laws.

Item Type: Working or Discussion Paper (Working Paper)
Subjects: H Social Sciences > HG Finance
Q Science > QA Mathematics
Divisions: Faculty of Social Sciences > Warwick Business School > Financial Econometrics Research Centre
Faculty of Social Sciences > Warwick Business School
Library of Congress Subject Headings (LCSH): Scaling (Social sciences), Stock exchanges -- Mathematical models, Multifractals, Markov processes, Estimation theory
Series Name: Working papers (Warwick Business School. Financial Econometrics Research Centre)
Publisher: Warwick Business School, Financial Econometrics Research Centre
Place of Publication: Coventry
Official Date: 2007
Dates:
DateEvent
2007Published
Number: No.07-
Number of Pages: 20
Institution: University of Warwick
Status: Not Peer Reviewed
Access rights to Published version: Open Access
Funder: Sixth Framework Programme (European Commission) (FP6), Australian Research Council (ARC)
Grant number: 516446 (SFP), DP03440044 (ARC), DP0558183 (ARC)

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