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Christian-Albrechts-Universität zu Kiel

Institut für Volkswirtschaftslehre - Department of Economics
Economics Working Papers

Economics Working Papers: Abstract 2007-06


Nummer

2007-06

Autoren

Ruipeng Liu, T. Di Matteo, Thomas Lux

 

Titel

 

True and Apparent Scaling: The Proximity of the Markov-Switching Multifractal Model to Long-Range Dependence
Abstract In this paper, we consider daily financial data of a collection of different stock market indices, exchange rates, and interest rates, and we analyze their multi-scaling properties by estimating a simple specification of the Markov-switching multifractal model (MSM). In order to see how well the estimated models capture the temporal dependence of the data, we estimate and compare the scaling exponents H(q) (for q = 1, 2) for both empirical data and simulated data of the estimated MSM models. In most cases the multifractal model appears to generate `apparent' long memory in agreement with the empirical scaling laws.

Keywords: scaling, generalized Hurst exponent, multifractal model, GMM estimation

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