Estimating the Hurst parameter in financial time series via heuristic approaches

Abstract

This research investigates long memory financial equity markets using three heuristic methodologies namely a proposed modified variance time-aggregated plot, modified rescaled-range plot and periodogram approaches. The intensity of the long memory process is quantified in terms of Hurst parameter (H). Five Malaysian equity market indices are selected in the empirical studies with the inclusion of pre- and post-drastic economic events. Our empirical results evidenced dissimilar long memory behaviours in the different regimes of significant economic events. It is also found that after the short-memory adjustment, all the equity markets exhibited substantial reductions in long memory estimations.