Wavelet-based detection of coherent structures and self-affinity in financial data

B.J.W. Fleming, D. Yu, R.G. Harrison and D. Jubb
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B.J.W. Fleming: Department of Physics, Heriot-Watt University, Riccarton, Edinburgh EH14 4AS, UK
D. Yu: Department of Physics, Heriot-Watt University, Riccarton, Edinburgh EH14 4AS, UK
R.G. Harrison: Department of Physics, Heriot-Watt University, Riccarton, Edinburgh EH14 4AS, UK
D. Jubb: Standard Life Investments, 1 George Street, Edinburgh EH2 2LL, UK

The European Physical Journal B: Condensed Matter and Complex Systems, 2001, vol. 20, issue 4, 543-546

Abstract: Abstract: As a linear superposition of translated and dilated versions of a chosen analyzing wavelet function, the wavelet transform lends itself to the analysis of underlying multi-scale structure in nonstationary time series. In this work, we use the discrete wavelet transform (DWT) to investigate scaling and search for the presence of coherent structures in financial data. Quantitative measurements are given by the DWT of the original time series and wavelet coefficient variance. We find that variations and correlations in the transform coefficients are able to indicate the presence of structure and that measurements based on the DWT allow us to observe scaling directly in the nonstationary time series.

Keywords: PACS. 05.45.Tp Time series analysis – 05.40.-a Fluctuation phenomena; random processes; noise; and Brownian motion. – 02.90.+p Other topics in mathematical methods in physics. (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s100510170236

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