Economics at your fingertips  

Investigating detrended fluctuation analysis with structural breaks

Rui Menezes, Álvaro Oliveira and Sofia Portela

Physica A: Statistical Mechanics and its Applications, 2019, vol. 518, issue C, 331-342

Abstract: Detrended Fluctuation Analysis has been used in several fields of science to study the statistical properties of trend stationary and nonstationary time-series. Its application to financial data has produced important results concerning long-range correlations and long-memory. However, these results may be contaminated if the researcher attributes to nonstationary trends the effect of stationary trends with endogenous structural breaks. Our paper proposes a modified DFA model where boxes to determine local trends are replaced by endogenous structural break windows. We also allow local trends fitted by quadratic functions and use squared residuals in place of patchy standard deviations to study the magnitude of the power-law exponent. The results show that our modified DFA model performs better than the fixed length alternatives originally proposed, and is, therefore, a suitable model to fit with financial data. Consistently with previous findings, our results show positive long-range correlation in all indices with the higher value for emerging markets.

Keywords: Detrended fluctuation analysis; Detrended walk; Structural break; Forecast accuracy; Power-law (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

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

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-03-16
Handle: RePEc:eee:phsmap:v:518:y:2019:i:c:p:331-342