Long memory and multifractality:a joint test

Onali, Enrico and Goddard, John (2016). Long memory and multifractality:a joint test. Physica A, 451 , 288–294.

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.

Publication DOI: https://doi.org/10.1016/j.physa.2015.12.166
Divisions: Aston Business School
Additional Information: © 2016, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Uncontrolled Keywords: Exchange rate returns,Long memory,Multifractality,Volatility clustering,Condensed Matter Physics,Statistics and Probability
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Related URLs: http://www.scop ... tnerID=8YFLogxK (Scopus URL)
https://www.sci ... 1278?via%3Dihub (Publisher URL)
Published Date: 2016-06-01
Authors: Onali, Enrico ( 0000-0003-3723-2078)
Goddard, John

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