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Multifractal Detrended Fluctuation Analysis of the Chinese Stock Index Futures Market

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Xinsheng Lu & Jie Tian & Ying Zhou & Zhihui Li, 2012. "Multifractal Detrended Fluctuation Analysis of the Chinese Stock Index Futures Market," Working Papers 2012-08, Auckland University of Technology, Department of Economics.
    • Handle: RePEc:aut:wpaper:201208
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    References listed on IDEAS

    as
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    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.
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    Cited by:

    1. Liu, Zhengli & Shang, Pengjian & Wang, Yuanyuan, 2019. "Multifractal weighted permutation analysis based on Rényi entropy for financial time series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 536(C).
    2. Menezes, Rui & Oliveira, Álvaro & Portela, Sofia, 2019. "Investigating detrended fluctuation analysis with structural breaks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 518(C), pages 331-342.

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    More about this item

    Keywords

    Multifractality; Stock index futures; MF-DFA; Generalized Hurst exponent;
    All these keywords.

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