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Measuring multifractality of stock price fluctuation using multifractal detrended fluctuation analysis

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  • Yuan, Ying
  • Zhuang, Xin-tian
  • Jin, Xiu

Abstract

Analyzing the Shanghai stock price index daily returns using MF-DFA method, it is found that there are two different types of sources for multifractality in time series, namely, fat-tailed probability distributions and non-linear temporal correlations. Based on that, a sliding window of 240 frequency data in 5 trading days was used to study stock price index fluctuation. It is found that when the stock price index fluctuates sharply, a strong variability is clearly characterized by the generalized Hurst exponents h(q). Therefore, two measures, Δh and σ, based on generalized Hurst exponents were proposed to compare financial risks before and after Price Limits and Reform of Non-tradable Shares. The empirical results verify the validity of the measures, and this has led to a better understanding of complex stock markets.

Suggested Citation

  • Yuan, Ying & Zhuang, Xin-tian & Jin, Xiu, 2009. "Measuring multifractality of stock price fluctuation using multifractal detrended fluctuation analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(11), pages 2189-2197.
    • Handle: RePEc:eee:phsmap:v:388:y:2009:i:11:p:2189-2197
    DOI: 10.1016/j.physa.2009.02.026
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