Memory effect and multifractality of cross-correlations in financial markets

Tian Qiu, Guang Chen, Li-Xin Zhong and Xiao-Wei Lei

Physica A: Statistical Mechanics and its Applications, 2011, vol. 390, issue 5, 828-836

Abstract: We introduce an instantaneous and an average instantaneous cross-correlation function to detect the temporal cross-correlations between individual stocks based on the daily data of the United States and the Chinese stock markets. The memory effect of the instantaneous cross-correlations is investigated by applying the detrended fluctuation analysis (DFA), where the DFA exponents can be partly explained by the correlation function from the common sense. Long-range memory is observed for the average instantaneous cross-correlations, and persists up to a month magnitude of timescale for the United States stock market and half a month magnitude of timescale for the Chinese stock market. In addition, multifractal nature is investigated by a multifractal detrended fluctuation analysis.

Keywords: Econophysics; Stock market; Detrended fluctuation analysis (search for similar items in EconPapers)
Date: 2011
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:390:y:2011:i:5:p:828-836

DOI: 10.1016/j.physa.2010.11.011

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