File(s) under permanent embargo
True and apparent scaling : the proximity of the Markov-switching multifractal model to long-range dependence
journal contribution
posted on 2007-09-01, 00:00 authored by Ruipeng LiuRuipeng Liu, T Di Matteo, T LuxIn 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 (MSM) model. In order to see how well the estimated model captures 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 MSM model. In most cases the multifractal model appears to generate ‘apparent’ long memory in agreement with the empirical scaling laws.