Wavelets based multiscale analysis of select global equity returns

Abstract

This paper examines the relationship between Indian equity prices other developed markets, in the time-scale domain, using wavelets based multiscale analysis and cross wavelet analysis. Stock markets are analyzed at different levels of resolution which makes it possible to perform a scale by scale analysis enabling us to detect the correlation and cross-correlation structures at time periods with high frequency oscillations and also the relatively low frequency structures. There seems to be a weak integration between BSE and other developed markets at almost all levels of time-scale resolution and a strong relationship between French and German Markets. Analyzing the stock returns at different multiscale resolution makes it easier for agents dealing with different trading horizons