Stock Returns Declustering Under Time Dependent Hölder Exponent

2010 International Conference on E-business, Management and Economics, pp. 14-21, Hong Kong,China, 2010

7 Pages Posted: 18 Jul 2011 Last revised: 30 Jul 2011

Date Written: July 28, 2011

Abstract

Two of the most important stylized facts well-known in finance relate to the non-Gaussian distribution and to the volatility clustering of stock returns. In this paper, we show that a new class of stochastic processes – called Multifractional Processes with Random Exponent (MPRE) – can capture in a very parsimonious way both these “anomalies”. Furthermore, we provide evidence that the sole knowledge of functional parameter characterizing the MPRE allows to calculate residuals that perform much better than those obtained by other discrete models such as the GARCH family.

Keywords: multifractional processes with random exponents, declustering, residuals

JEL Classification: C12, C13, C22, G12

Suggested Citation

Bianchi, Sergio and Pantanella, Alexandre, Stock Returns Declustering Under Time Dependent Hölder Exponent (July 28, 2011). 2010 International Conference on E-business, Management and Economics, pp. 14-21, Hong Kong,China, 2010, Available at SSRN: https://ssrn.com/abstract=1888176

Sergio Bianchi (Contact Author)

University of Cassino ( email )

Via S. Angelo - Campus Folcara
Dept. of Economics and Law
Cassino, 03043
Italy
+3907762994846 (Phone)
+390776393034 (Fax)

HOME PAGE: http://www.docente.unicas.it/sergio_bianchi

Alexandre Pantanella

University of Cassino ( email )

Via S. Angelo, Loc. Folcara
Cassino, Frosinone 03043
Italy

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