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Journal Article

Testing power-law cross-correlations: Rescaled covariance test

Krištoufek Ladislav

: European Physical Journal B vol.86, 10 (2013)

: GA402/09/0965, GA ČR

: power-law cross-correlations, testing, long-term memory

: 10.1140/epjb/e2013-40705-y

: http://library.utia.cas.cz/separaty/2013/E/kristoufek-testing power-law cross-correlations rescaled covariance test.pdf

(eng): We introduce a new test for detection of power-law cross-correlations among a pair of time series – the rescaled covariance test. The test is based on a power-law divergence of the covariance of the partial sums of the long-range cross-correlated processes. Utilizing a heteroskedasticity and auto-correlation robust estimator of the long-term covariance, we develop a test with desirable statistical properties which is well able to distinguish between short- and long-range cross-correlations. Such test should be used as a starting point in the analysis of long-range cross-correlations prior to an estimation of bivariate long-term memory parameters. As an application, we show that the relationship between volatility and traded volume, and volatility and returns in the financial markets can be labeled as the power-law cross-correlated one.

: AH

2019-01-07 08:39