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Effects of Exponential Trends on Correlations of Stock Markets

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  • Ai-Jing Lin
  • Peng-Jian Shang
  • Hua-Chun Zhou

Abstract

Detrended fluctuation analysis (DFA) is a scaling analysis method used to estimate long-range power-law correlation exponents in time series. In this paper, DFA is employed to discuss the long-range correlations of stock market. The effects of exponential trends on correlations of Hang Seng Index (HSI) are investigated with emphasis. We find that the long-range correlations and the positions of the crossovers of lower order DFA appear to have no immunity to the additive exponential trends. Further, our analysis suggests that an increase in the DFA order increases the efficiency of eliminating on exponential trends. In addition, the empirical study shows that the correlations and crossovers are associated with DFA order and magnitude of exponential trends.

Suggested Citation

  • Ai-Jing Lin & Peng-Jian Shang & Hua-Chun Zhou, 2014. "Effects of Exponential Trends on Correlations of Stock Markets," Mathematical Problems in Engineering, Hindawi, vol. 2014, pages 1-11, April.
    • Handle: RePEc:hin:jnlmpe:340845
    DOI: 10.1155/2014/340845
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