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

✍ Scribed by Ruipeng Liu; T. Di Matteo; Thomas Lux

• Publisher: Elsevier Science
• Year: 2007
• Tongue: English
• Weight: 162 KB
• Volume: 383
• Category: Article
• ISSN: 0378-4371
• DOI: 10.1016/j.physa.2007.04.085

✦ Synopsis

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 HðqÞ (for q ¼ 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.