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Nonlinear bivariate dependency of price–volume relationships in agricultural commodity futures markets: A perspective from Multifractal Detrended Cross-Correlation Analysis

Ling-Yun He and Shu-Peng Chen

Physica A: Statistical Mechanics and its Applications, 2011, vol. 390, issue 2, 297-308

Abstract: Nonlinear dependency between characteristic financial and commodity market quantities (variables) is crucially important, especially between trading volume and market price. Studies on nonlinear dependency between price and volume can provide practical insights into market trading characteristics, as well as the theoretical understanding of market dynamics. Actually, nonlinear dependency and its underlying dynamical mechanisms between price and volume can help researchers and technical analysts in understanding the market dynamics by integrating the market variables, instead of investigating them in the current literature. Therefore, for investigating nonlinear dependency of price–volume relationships in agricultural commodity futures markets in China and the US, we perform a new statistical test to detect cross-correlations and apply a new methodology called Multifractal Detrended Cross-Correlation Analysis (MF-DCCA), which is an efficient algorithm to analyze two spatially or temporally correlated time series. We discuss theoretically the relationship between the bivariate cross-correlation exponent and the generalized Hurst exponents for time series of respective variables. We also perform an empirical study and find that there exists a power-law cross-correlation between them, and that multifractal features are significant in all the analyzed agricultural commodity futures markets.

Keywords: Agricultural commodity futures market; Nonlinear bivariate dependency; Multifractal Detrended Cross-Correlation Analysis; Multifractality (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:390:y:2011:i:2:p:297-308

DOI: 10.1016/j.physa.2010.09.018

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Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

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