Advanced Search
MyIDEAS: Login

Parameter Estimation and Forecasting for Multiplicative Lognormal Cascades

Contents:

Author Info

  • Andrés E. Leövey,Thomas Lux
Registered author(s):

    Abstract

    We study the well-known multiplicative Lognormal cascade process in which the multiplication of Gaussian and Lognormally distributed random variables yields time series with intermittent bursts of activity. Due to the non-stationarity of this process and the combinatorial nature of such a formalism, its parameters have been estimated mostly by fitting the numerical approximation of the associated non-Gaussian pdf to empirical data, cf. Castaing et al. [Physica D, 46, 177 (1990)]. More recently, an alternative estimator based upon qth order absolute moments has been introduced by Kiyono et al. [Phys. Rev. E 76 41113 (2007)]. In this paper, we pursue this moment-based approach further and develop a more rigorous Generalized Method of Moments (GMM) estimation procedure to cope with the documented difficulties of previous methodologies. We show that even under uncertainty about the actual number of cascade steps, our methodology yields very reliable results for the estimated intermittency parameter. Employing the Levinson-Durbin algorithm for best linear forecasts, we also show that estimated parameters can be used for forecasting the evolution of the turbulent flow. We compare forecasting results from the GMM and Kiyono et al.'s procedure via Monte Carlo simulations. We finally test the applicability of our approach by estimating the intermittency parameter and forecasting of volatility for a sample of financial data from stock and foreign exchange markets

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.ifw-members.ifw-kiel.de/publications/parameter-estimation-and-forecasting-for-multiplicative-lognormal-cascades/KWP-1746_Parameter%20Estimation.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1746.

    as in new window
    Length: 30 pages
    Date of creation: Dec 2011
    Date of revision:
    Handle: RePEc:kie:kieliw:1746

    Contact details of provider:
    Postal: Kiellinie 66, D-24105 Kiel
    Phone: +49 431 8814-1
    Fax: +49 431 85853
    Email:
    Web page: http://www.ifw-kiel.de
    More information through EDIRC

    Related research

    Keywords: Random Lognormal cascades; GMM estimation; best linear forecasting; volatility of financial returns;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Adlai Fisher & Laurent Calvet & Benoit Mandelbrot, 1997. "Multifractality of Deutschemark/US Dollar Exchange Rates," Cowles Foundation Discussion Papers 1166, Cowles Foundation for Research in Economics, Yale University.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:kie:kieliw:1746. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dieter Stribny).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.