Long memory and multifractality: a joint test

Goddard, John and Onali, Enrico (2016) Long memory and multifractality: a joint test. Physica A: Statistical Mechanics and its Applications, 451 . pp. 288-294. ISSN 0378-4371

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Abstract

The properties of statistical tests for hypotheses concerning the parameters of the multifractal model of asset returns (MMAR) are investigated, using Monte Carlo techniques. We show that, in the presence of multifractality, conventional tests of long memory tend to over-reject the null hypothesis of no long memory. Our test addresses this issue by jointly estimating long memory and multifractality. The estimation and test procedures are applied to exchange rate data for 12 currencies. Among the nested model specifications that are investigated, in 11 out of 12 cases, daily returns are most appropriately characterized by a variant of the MMAR that applies a multifractal time-deformation process to NIID returns. There is no evidence of long memory.

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Item Type: Article
RIS ID: https://nottingham-repository.worktribe.com/output/786994
Keywords: Multifractality; Long memory; Volatility clustering; Exchange rate returns
Schools/Departments: University of Nottingham, UK > Faculty of Social Sciences > Nottingham University Business School
Identification Number: https://doi.org/10.1016/j.physa.2015.12.166
Depositing User: Eprints, Support
Date Deposited: 19 Jun 2018 10:29
Last Modified: 04 May 2020 17:48
URI: https://eprints.nottingham.ac.uk/id/eprint/52500

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