Blocks adjustment – reduction of bias and variance of detrended fluctuation analysis using Monte Carlo simulation
Sebastian Michalski ()
No 15, Working Papers from Department of Applied Econometrics, Warsaw School of Economics
The length of minimal and maximal blocks equally distant on log-log scale versus fluctuation function considerably influences bias and variance of DFA. Through a number of extensive Monte Carlo simulations and different fractional Brownian motion/fractional Gaussian noise generators, we found the pair of minimal and maximal blocks that minimizes the sum of mean-squared error of estimated Hurst exponents for the series of length N = 2^p, p = 7, . . . , 15. Sensitivity of DFA to sort-range correlations was examined using ARFIMA(p, d, q) generator. Due to the bias of the estimator for anti-persistent processes, we narrowed down the range of Hurst exponent to 1/2 =
Keywords: Detrended Fluctuation Analysis; Scaled Windowed Variance; fractional Brownian motion; Hurst exponent; ARFIMA (search for similar items in EconPapers)
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