Multifractality and Long-Range Dependence of Asset Returns: The Scaling Behaviour of the Markov-Switching Multifractal Model with Lognormal Volatility Components
Tiziana Di Matteo and
Kiel Working Papers from Kiel Institute for the World Economy
In this paper we consider daily financial data from various sources (stock market indices, foreign exchange rates and bonds) and analyze their multi-scaling properties by estimating the parameters of a Markov-switching multifractal model (MSM) with Lognormal volatility components. In order to see how well estimated models capture the temporal dependency of the empirical data, we estimate and compare (generalized) Hurst exponents for both empirical data and simulated MSM models. In general, the Lognormal MSM models generate ‘apparent’ long memory in good agreement with empirical scaling provided one uses sufficiently many volatility components. In comparison with a Binomial MSM specification , results are almost identical. This suggests that a parsimonious discrete specification is flexible enough and the gain from adopting the continuous Lognormal distribution is very limited
Keywords: Markov-switching multifractal; scaling; return volatility (search for similar items in EconPapers)
JEL-codes: C22 G12 (search for similar items in EconPapers)
References: Add references at CitEc
Citations View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
https://www.ifw-members.ifw-kiel.de/publications/m ... nge%20Dependence.pdf (application/pdf)
Journal Article: MULTIFRACTALITY AND LONG-RANGE DEPENDENCE OF ASSET RETURNS: THE SCALING BEHAVIOR OF THE MARKOV-SWITCHING MULTIFRACTAL MODEL WITH LOGNORMAL VOLATILITY COMPONENTS (2008)
Working Paper: Multifractality and long-range dependence of asset returns: The scaling behaviour of the Markov-switching multifractal model with lognormal volatility components (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:kie:kieliw:1427
Access Statistics for this paper
More papers in Kiel Working Papers from Kiel Institute for the World Economy Contact information at EDIRC.
Series data maintained by Dieter Stribny ().