Power-law autocorrelated stochastic processes with long-range
cross-correlations |
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| Authors: | B Podobnik D F Fu H E Stanley P Ch Ivanov |
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| Institution: | (1) Faculty of Civil Engineering, University of Rijeka, 51000 Rijeka, Croatia;(2) Zagreb School of Economics and Management, 10000 Zagreb, Croatia;(3) Center for Polymer Studies and Department of Physics, Boston University, Boston, MA 02215, USA;(4) Institute of Solid State Physics, Bulgarian Academy of Sciences, 1784 Sofia, Bulgaria |
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| Abstract: | We develop a stochastic process with two coupled variables where
the absolute values of each variable exhibit long-range power-law
autocorrelations and are also long-range cross-correlated. We investigate how
the scaling exponents characterizing power-law autocorrelation and long-range
cross-correlation behavior in the absolute values of the generated variables
depend on the two parameters in our model. In particular, if the
autocorrelation is stronger, the cross-correlation is also stronger. We test
the utility of our approach by comparing the autocorrelation and
cross-correlation properties of the time series generated by our model with
data on daily returns over ten years for two major financial indices, the
Dow Jones and the S&P500, and on daily returns of two well-known
company stocks, IBM and Microsoft, over five years. |
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| Keywords: | 89 90 +n Other topic in areas of applied and interdisciplinary physics 05 45 Tp Time series analysis 05 40 Fb Random walks and Levy flights |
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