Using the Scaling Analysis to Characterize Financial Markets

Details Using the Scaling Analysis to Characterize Financial Markets Using the Scaling Analysis to Characterize Financial Markets

2003-02-21

arxiv.org/abs/cond-mat/0302434v1

Physics

Condensed Matter

Statistical Mechanics

37 pages, 10 figures, 7 tables

Scientific paper

We empirically analyze the scaling properties of daily Foreign Exchange rates, Stock Market indices and Bond futures across different financial markets. We study the scaling behaviour of the time series by using a generalized Hurst exponent approach. We verify the robustness of this approach and we compare the results with the scaling properties in the frequency-domain. We find evidence of deviations from the pure Brownian motion behavior. We show that these deviations are associated with characteristics of the specific markets and they can be, therefore, used to distinguish the different degrees of development of the markets.

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