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Multifractal Detrended Fluctuation Analysis of the Chinese Stock Index Futures Market

Listed author(s):
  • Xinsheng Lu


    (Department of Economics and Finance, Tongji University, China)

  • Jie Tian


    (Centre for Resource Economics and Management, Northwest A&F University, Yangling, China)

  • Ying Zhou


    (Department of Economics, Auckland University of Technology)

  • Zhihui Li


    (Department of Economics, Jinan University, Jinan, China)

Registered author(s):

    Based on the multifractal detrended fluctuation analysis (MF-DFA) and multifractal spectrum analysis, this paper empirically studies the multifractal properties of the Chinese stock index futures market. Using a total of 2,942 ten-minute closing prices, we find that the Chinese stock index futures returns exhibit long-range correlations and multifractality, making the single-scale index insufficient to describe the futures price fluctuations. Further, by comparing the original time series with the transformed time series through shuffling procedure and phase randomization procedure, we show that there exists two different sources of the multifractality for the Chinese stock index futures market. Our results suggest that the multifractality is mainly due to long-range correlations, although the fat-tailed probability distributions also contribute to such multifractal behavior.

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    Paper provided by Auckland University of Technology, Department of Economics in its series Working Papers with number 2012-08.

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    Length: 15 pages
    Date of creation: Oct 2012
    Handle: RePEc:aut:wpaper:201208
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    1. Wang, Yudong & Wei, Yu & Wu, Chongfeng, 2011. "Analysis of the efficiency and multifractality of gold markets based on multifractal detrended fluctuation analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(5), pages 817-827.
    2. Norouzzadeh, P. & Rahmani, B., 2006. "A multifractal detrended fluctuation description of Iranian rial–US dollar exchange rate," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 367(C), pages 328-336.
    3. Jian Yang & Zihui Yang & Yinggang Zhou, 2012. "Intraday price discovery and volatility transmission in stock index and stock index futures markets: Evidence from China," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 32(2), pages 99-121, February.
    4. Gu, Rongbao & Chen, Hongtao & Wang, Yudong, 2010. "Multifractal analysis on international crude oil markets based on the multifractal detrended fluctuation analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(14), pages 2805-2815.
    5. Pierluigi Bologna & Laura Cavallo, 2002. "Does the introduction of stock index futures effectively reduce stock market volatility? Is the 'futures effect' immediate? Evidence from the Italian stock exchange using GARCH," Applied Financial Economics, Taylor & Francis Journals, vol. 12(3), pages 183-192.
    6. Li, Zhihui & Lu, Xinsheng, 2012. "Cross-correlations between agricultural commodity futures markets in the US and China," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(15), pages 3930-3941.
    7. 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.
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