Long-range memory test by the burst and inter-burst duration distribution

Vygintas Gontis

Papers from arXiv.org

Abstract: It is empirically established that order flow in the financial markets is positively auto-correlated and can serve as an example of a social system with long-range memory. Nevertheless, widely used long-range memory estimators give varying values of the Hurst exponent. We propose the burst and inter-burst duration statistical analysis as one more test of long-range memory and implement it with the limit order book data comparing it with other widely used estimators. This method gives a more reliable evaluation of the Hurst exponent independent of the stock in consideration or time definition used. Results strengthen the expectation that burst and inter-burst duration analysis can serve as a better method to investigate the property of long-range memory.

Date: 2020-05, Revised 2020-10
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Citations: View citations in EconPapers (2)

Published in J. Stat. Mech. (2020) 093406

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