True and apparent scaling: the proximity of the markov- switching multifractal model to long-range dependence
Liu, Ruipeng, Di Matteo, T. and Lux, Thomas, 1962- (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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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|
|Number of Pages:||20|
|Status:||Not Peer Reviewed|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)|
 U. A. Müller, M. M. Dacorogna, R. B. Olsen, O. V. Pictet, M. Schwarz, C. Morgenegg, Journal of Banking and Finance 14, 1189-1208, (1990).
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