TY - JOUR
T1 - Long memory and multifractality
T2 - a joint test
AU - Onali, Enrico
AU - Goddard, John
N1 - © 2016, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
PY - 2016/6/1
Y1 - 2016/6/1
N2 - 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.
AB - 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.
KW - Exchange rate returns
KW - Long memory
KW - Multifractality
KW - Volatility clustering
UR - http://www.scopus.com/inward/record.url?scp=84958793869&partnerID=8YFLogxK
UR - https://www.sciencedirect.com/science/article/pii/S0378437116001278?via%3Dihub
U2 - 10.1016/j.physa.2015.12.166
DO - 10.1016/j.physa.2015.12.166
M3 - Article
AN - SCOPUS:84958793869
SN - 0378-4371
VL - 451
SP - 288
EP - 294
JO - Physica A
JF - Physica A
ER -