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Modeling non-stationarities in high-frequency financial time series

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posted on 2023-06-09, 16:35 authored by Linda Ponta, Mailan Trinh, Marco Raberto, Enrico Scalas, Silvano Cincotti
We study tick-by-tick financial returns for the FTSE MIB index of the Italian Stock Exchange (Borsa Italiana). We confirm previously detected non-stationarities. Scaling properties reported before for other high-frequency financial data are only approximately valid. As a consequence of our empirical analyses, we propose a simple model for non-stationary returns, based on a non-homogeneous normal compound Poisson process. It turns out that our model can approximately reproduce several stylized facts of high-frequency financial time series. Moreover, using Monte Carlo simulations, we analyze order selection for this class of models using three information criteria: Akaike’s information criterion (AIC), the Bayesian information criterion (BIC) and the Hannan-Quinn information criterion (HQ). For comparison, we perform a similar Monte Carlo experiment for the ACD (autoregressive conditional duration) model. Our results show that the information criteria work best for small parameter numbers for the compound Poisson type models, whereas for the ACD model the model selection procedure does not work well in certain cases.

History

Publication status

  • Published

File Version

  • Accepted version

Journal

Physica A: Statistical Mechanics and its Applications

ISSN

0378-4371

Publisher

Elsevier

Volume

521

Page range

173-196

Department affiliated with

  • Mathematics Publications

Research groups affiliated with

  • Probability and Statistics Research Group Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2019-01-21

First Open Access (FOA) Date

2020-01-19

First Compliant Deposit (FCD) Date

2019-01-21

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