32,611 research outputs found
Anomalous volatility scaling in high frequency financial data
Volatility of intra-day stock market indices computed at various time
horizons exhibits a scaling behaviour that differs from what would be expected
from fractional Brownian motion (fBm). We investigate this anomalous scaling by
using empirical mode decomposition (EMD), a method which separates time series
into a set of cyclical components at different time-scales. By applying the EMD
to fBm, we retrieve a scaling law that relates the variance of the components
to a power law of the oscillating period. In contrast, when analysing 22
different stock market indices, we observe deviations from the fBm and Brownian
motion scaling behaviour. We discuss and quantify these deviations, associating
them to the characteristics of financial markets, with larger deviations
corresponding to less developed markets.Comment: 25 pages, 11 figure, 5 table
Modified detrended fluctuation analysis based on empirical mode decomposition
Detrended fluctuation analysis (DFA) is a simple but very efficient method
for investigating the power-law long-term correlations of non-stationary time
series, in which a detrending step is necessary to obtain the local
fluctuations at different timescales. We propose to determine the local trends
through empirical mode decomposition (EMD) and perform the detrending operation
by removing the EMD-based local trends, which gives an EMD-based DFA method.
Similarly, we also propose a modified multifractal DFA algorithm, called an
EMD-based MFDFA. The performance of the EMD-based DFA and MFDFA methods is
assessed with extensive numerical experiments based on fractional Brownian
motion and multiplicative cascading process. We find that the EMD-based DFA
method performs better than the classic DFA method in the determination of the
Hurst index when the time series is strongly anticorrelated and the EMD-based
MFDFA method outperforms the traditional MFDFA method when the moment order
of the detrended fluctuations is positive. We apply the EMD-based MFDFA to the
one-minute data of Shanghai Stock Exchange Composite index, and the presence of
multifractality is confirmed.Comment: 6 RevTex pages including 5 eps figure
Stock market returns and economic activity: evidence from wavelet analysis
In this paper we investigate the relationship between stock market returns and economic activity by using signal decomposition techniques based on wavelet analysis. In particular, we apply the maximum overlap discrete wavelet transform (MODWT) to the DJIA stock price index and the industrial production index for US over the period 1961:1- 2005:3 and using the definitions of wavelet variance, wavelet correlation and cross-correlations analyze the association as well as the lead/lag relationship between stock prices and industrial production at the different time scales. Our results show that stock market returns tends to lead the level of economic activity but only at the highest scales (lowest frequencies), corresponding to periods of 16 months and longer, and that the periods by which stock returns lead output increase as the wavelet time scale increases.stock market, industrial production, wavelet analysis
A Wavelet Analysis of MENA Stock Markets
In this paper we revisit the issue of integration of emerging stock markets with each other and with the developed markets over different time horizons using weekly stock indices data from June 1997 until March 2005 of the five major MENA equity markets (Egypt, Israel, Jordan, Morocco and Turkey) and applying the discrete wavelet decomposition analysis. We decompose the weekly stock market returns of the main indices of the MENA countries into different time scale components using the non-decimated discrete wavelet transform and then analyze the time- scale relationship between the stock market indices of some developed areas (SP and Eurostoxx) and those of the MENA countries. The results from wavelet correlation analysis both among MENA stock markets and between these markets and some major stock markets suggests that MENA stock markets are nor regionally nor internationally integrated.stock market returns, comovements, wavelet correlation analysis
Are Trump and Bitcoin Good Partners?
During times of extreme market turmoil, it is acknowledged that there is a
tendency towards "flight to safety". A strong (weak) safe haven is defined as
an asset that has a significant positive (negative) return in periods where
another asset is in distress, while hedge has to be negatively correlated
(uncorrelated) on average. The Bitcoin's surge alongside the aftermath of
Trump's win in the 2016 U.S. presidential elections has strengthened its status
as the modern safe haven. This paper uses a truly noise-assisted data analysis
method, termed as Ensemble Empirical Mode Decomposition-based approach, to
examine whether Bitcoin can act as a hedge and safe haven for U.S. stock price
index. The results document that the Bitcoin's safe-haven property is
time-varying and that it has primarily been a weak safe haven in the short term
and the long-term. We also demonstrate that precious metals lost their safe
haven properties over time as the correlation between gold/silver and U.S.
stock price declines from short-to long-run horizons
The Changing Relationship Between Job Loss Announcements and Stock Prices: 1970-1999
We study the reaction of stock prices to announcements of reductions in force (RIFs) using a sample of 4273 such announcements in 1160 large firms during the 1970-99 period collected from the Wall Street Journal. We note that the total number of actual announcements for the firms in our sample follows the business cycle quite closely. We then examine changes over time in standard summary statistics (means, medians, fraction positive) of the distribution of stock market reactions, measured by the cumulative excess returns (CER) of firmsā stock prices over a 3-day event window centered on the announcement date, as well as changes over time in kernel density estimates of this distribution. We find clear evidence that the distribution of stock market reactions shifted to the right (became less negative) over time. One possible explanation for this change is that, over the last three decades, RIFs designed to improve efficiency have become more common relative to RIFs designed to cope with reductions in product demand. We estimate multivariate regression models of the CER controlling for the stated reason for the announceed layoff, industry, and other characteristics of the announced layoff. We find that almost none of the decline in the negative average stock price reaction between the 1970s and 1990s can be explained by these factors
Growth accounting for the euro area: a structural approach
This paper is concerned with the estimation of euro area potential output growth and its decomposition according to the sources of growth. The growth accounting exercise is based on a multivariate structural time series model which combines the decomposition of total output according to the production function approach with price and wage equations that embody Phillips type relationships linking inflation and nominal wage dynamics to the output gap and cyclical unemployment, respectively. Assuming a Cobb-Douglas technology with constant returns to scale, potential output results from the combination of the trend levels of total factor productivity and factor inputs, capital and labour (hours worked), which is decomposed into labour intensity (average hours worked), the employment rate, the participation rate, and population of working age. The nominal variables (prices and wages) play an essential role in defining the trend levels of the components of potential output, as the latter should pose no inflationary pressures on prices and wages. The structural model is further extended to allow for the estimation of potential output growth and the decomposition according to the sources of growth at different horizons (long-run, medium run and short run); in particular, we propose and evaluate a modelābased approach to the extraction of the lowāpass component of potential output growth at different cutoff frequencies. The approach has two important advantages: the signal extraction filters have an automatic adaptation property at the boundaries of the sample period, so that the real time estimates do not suffer from what is often referred to as the āendāof-sample biasā. Secondly, it is possible to assess the uncertainty of potential output growth estimates with different degrees of smoothness. JEL Classification: C32, C51, E32, O47euro area, Low-pass filters, output gap, potential output, Production function approach, Unobserved Components
On the Co-movement of Crude, Gold Prices and Stock Index in Indian Market
This non-linear relationship in the joint time-frequency domain has been
studied for the Indian National Stock Exchange (NSE) with the international
Gold price and WTI Crude Price being converted from Dollar to Indian National
Rupee based on that week's closing exchange rate. Though a good correlation was
obtained during some period, but as a whole no such cointegration relation can
be found out. Using the \textit{Discrete Wavelet Analysis}, the data was
decomposed and the presence of Granger Causal relations was tested.
Unfortunately no significant relationships are being found. We then studied the
\textit{Wavelet Coherence} of the two pairs viz. NSE-Nifty \& Gold and
NSE-Nifty \& Crude. For different frequencies, the coherence between the pairs
have been studied. At lower frequencies, some relatively good coherence have
been found. In this paper, we report for the first time the co-movements
between Crude Oil, Gold and Indian Stock Market Index using Wavelet Analysis
(both Discrete and Continuous), a technique which is most sophisticated and
recent in market analysis. Thus for long term traders they can include gold
and/or crude in their portfolio along with NSE-Nifty index in order to decrease
the risk(volatility) of the portfolio for Indian Market. But for short term
traders, it will not be effective, not to include all the three in their
portfolio
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