Could Investors’ Expectations Explain Temporal Variations in Hurst’s Exponent, Loci of Multifractal Spectra, and Statistical Prediction Errors? The Case of the S&P 500 Index

C-Rene Dominique and Luis Eduardo Rivera-Solis

MPRA Paper from University Library of Munich, Germany

Abstract: Over the periods 1998-2002 and 2009-2011, the S&P-500 Index went from persistence to anti-persistence mode, as measured by the Hurst index H. To uncover the reasons that characterize such a change, this paper uses a simple method that consists in treating quasi self-similar segments of the Index as initiators, and then finding appropriate generators with two intervals each to asymptotically model the strange attractor. The multifractal formalism shows that the change in persistence implies a corresponding change in the multifractal spectrum, and an enlargement of the invariant equilibrium set, making a market crash more likely, most probably due to a collapse of investors’ expectations. This also means that all statistical predictions made in one mode would have been off by an amount proportional to change in any element of the generalized set of dimensions in the other.

Keywords: Persistence; Strange Equilibrium sets; Scaling Exponents; Multifractal Spectra; Generalized Dimensions of order q; Statistical-prediction-error (search for similar items in EconPapers)
JEL-codes: A10 C0 D84 G00 G01 G14 (search for similar items in EconPapers)
Date: 2012-02-01, Revised 2012-02-26
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in International Business Research No. 5.Volume(2012): pp. 8-15

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/41407/1/MPRA_paper_41407.pdf original version (application/pdf)

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: https://EconPapers.repec.org/RePEc:pra:mprapa:41407

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().