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Hurst exponents, Markov processes, and fractional Brownian motion

McCauley, Joseph L.; Gunaratne, Gemunu H.; Bassler, Kevin E. - In: Physica A: Statistical Mechanics and its Applications 379 (2007) 1, pp. 1-9

-infinite time interval is identical to that for a scaling Gaussian Markov process with H≠12 over a finite time interval. We conclude …

Persistent link: https://www.econbiz.de/10011062663

Martingales, nonstationary increments, and the efficient market hypothesis

McCauley, Joseph L.; Bassler, Kevin E.; Gunaratne, Gemunu H. - In: Physica A: Statistical Mechanics and its Applications 387 (2008) 15, pp. 3916-3920

We discuss the deep connection between nonstationary increments, martingales, and the efficient market hypothesis for stochastic processes x(t) with arbitrary diffusion coefficients D(x,t). We explain why a test for a martingale is generally a test for uncorrelated increments. We explain why...

Persistent link: https://www.econbiz.de/10010588900

Markov processes, Hurst exponents, and nonlinear diffusion equations: With application to finance

Bassler, Kevin E.; Gunaratne, Gemunu H.; McCauley, Joseph L. - In: Physica A: Statistical Mechanics and its Applications 369 (2006) 2, pp. 343-353

correlations like those found in fractional Brownian motion (fBm). We construct a large set of scaling solutions of Fokker … increments. For the scaling solutions, we show how to reduce the calculation of the probability density to a single integration … implies correlations fails for Markov processes with scaling solutions. Finally, we discuss the question of scaling of the …

Persistent link: https://www.econbiz.de/10011058407

Scaling, self-similarity and multifractality in FX markets

Xu, Zhaoxia; Gençay, Ramazan - In: Physica A: Statistical Mechanics and its Applications 323 (2003) C, pp. 578-590

This paper presents an empirical investigation of scaling and multifractal properties of US Dollar–Deutschemark (USD … exhibit power-law scaling in the tails. To test the multifractal properties of USD–DEM returns, the mean moment of the … different slopes for these powers of absolute returns. The nonlinearity of the scaling exponent indicates that the returns are …

Persistent link: https://www.econbiz.de/10010872935

Dynamics of real financial markets: A reply to Frank’s comment

Bassler, Kevin E.; Gunaratne, Gemunu H.; McCauley, Joseph L. - In: Physica A: Statistical Mechanics and its Applications 387 (2008) 13, pp. 3239-3241

This reply addresses the assertion in the comment of T.D. Frank [T.D. Frank, Physica A 387 (2008) 773] on our paper [K.E. Bassler, G.H. Gunaratne, J.L. McCauley, Physica A 369 (2006) 343] that the approach to modeling financial markets that we propose is unrealistic. In our paper, we considered...

Persistent link: https://www.econbiz.de/10011061331

Scaling and long-range dependence in option pricing III: A fractional version of the Merton model with transaction costs

Wang, Xiao-Tian; Yan, Hai-Gang; Tang, Ming-Ming; Zhu, En-Hui - In: Physica A: Statistical Mechanics and its Applications 389 (2010) 3, pp. 452-458

A model for option pricing of fractional version of the Merton model with ‘Hurst exponent’ H being in [1/2,1) is established with transaction costs. In particular, for H∈(1/2,1) the minimal price Cmin(t,St) of an option under transaction costs is obtained, which displays that the timestep...

Persistent link: https://www.econbiz.de/10011058111

Refined scaling hypothesis for anomalously diffusing processes

Badii, R.; Talkner, P. - In: Physica A: Statistical Mechanics and its Applications 291 (2001) 1, pp. 229-243

not scale like power laws, as generally assumed. A much improved scaling function is deduced, in analogy with a procedure … first applied to nearest-neighbour dimension estimators. Extremely accurate determination of the scaling exponents is thus …

Persistent link: https://www.econbiz.de/10010590063

Afghanistan: Balancing Social and Security Spending in the Context of a Shrinking Resource Envelope

Aslam, Aqib; Berkes, Enrico; Fukac, Martin; Menkulasi, Jeta - In: Asian Development Review 31 (2014) 2, pp. 165-197

For Afghanistan, the dual prospect of declining donor support and high ongoing security spending over the medium term keeps its government budget tight. This paper uses a general equilibrium model to capture the securityâ€“development trade-off facing the government in its effort to...

Persistent link: https://www.econbiz.de/10011141176

Momentum Trading, Return Chasing, and Predictable Crashes

Ghysels, Eric; Jagannathan, Ravi; Chabot, Benjamin - National Bureau of Economic Research (NBER) - 2014

We combine self-collected historical data from 1867 to 1907 with CRSP data from 1926 to 2012, to examine the risk and return over the past 140 years of one of the most popular mechanical trading strategies — momentum. We find that momentum has earned abnormally high risk-adjusted returns — a...

Persistent link: https://www.econbiz.de/10011096567

The role of macroeconomic stability in the finance-growth nexus. Threshold regression approach

Perri, Salvatore - In: STUDI ECONOMICI 2013/110 (2013) 110, pp. 57-81

In this paper we analyse the link between Finance and Growth and, in particular, if this link is variable in respect to changes in the "Macroeconomic Stability". This topic was studied by many authors without any definite conclusion being reached. This paper considers the theoretical and the...

Persistent link: https://www.econbiz.de/10011097928