True and apparent scaling: The proximity of the Markov-switching multifractal model to long-range dependence |
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Authors: | Ruipeng Liu T Di Matteo |
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Institution: | a Department of Economics, University of Kiel, 24118 Kiel, Germany b Department of Applied Mathematics, Research School of Physical Sciences and Engineering, The Australian National University, 0200 Canberra, Australia |
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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 (MSM) model. In order to see how well the estimated model captures 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 MSM model. In most cases the multifractal model appears to generate ‘apparent’ long memory in agreement with the empirical scaling laws. |
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Keywords: | Scaling Generalized Hurst exponent Multifractal model GMM estimation |
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