Multifractal analysis of volatility for detection of herding and bubble: evidence from CNX Nifty HFT
Open Access
- 6 September 2019
- journal article
- Published by LLC CPC Business Perspectives in Investment Management and Financial Innovations
- Vol. 16 (3), 182-193
- https://doi.org/10.21511/imfi.16(3).2019.17
Abstract
This study delves into the herding and bubble detection in the volatility domain of a capital market underlying. Furthermore, it focuses on creating heuristics, so that common investors find it relatively easy to understand the state of the market volatility. Hence, it can be termed that this study is focused on the specific financial innovation regarding bubble and herding detection coupled with investor awareness. The traces of possible volatility bubble emerge when it is positioned against its own lags (both lag1 and lag2). The volatility trigger indicated clear traces of herding and an embedded parabola function. Continuous and repetitive parabola function hinted at a subtle presence of “fractals”. Firstly, the detrended fluctuation analysis has been used with its multifractal variant. Secondly, the regularized form of Hurst calculation and analysis have been used. Both tests reveal the traces of nascent bubble formation owing to prominent herding in CNX Nifty HFT environment. They also indicate a clear link with Hausdorff topological patterns. These patterns would help to create heuristics, enabling investors to be aware of possible bubble and herd situations.Keywords
This publication has 12 references indexed in Scilit:
- A Brief History of Long Memory: Hurst, Mandelbrot and the Road to ARFIMA, 1951–1980Entropy, 2017
- Multifractal detrended fluctuation analysis: Practical applications to financial time seriesMathematics and Computers in Simulation, 2016
- Multifractality and long memory of a financial indexPhysica A: Statistical Mechanics and its Applications, 2014
- Empirical fractal geometry analysis of some speculative financial bubblesPhysica A: Statistical Mechanics and its Applications, 2012
- Introduction to Multifractal Detrended Fluctuation Analysis in MatlabFrontiers in Physiology, 2012
- Non-parametric estimation of a multiscale CHARN model using SVRQuantitative Finance, 2009
- Long-Term Dependence Characteristics of European Stock IndicesSSRN Electronic Journal, 2003
- Multifractal detrended fluctuation analysis of nonstationary time seriesPhysica A: Statistical Mechanics and its Applications, 2002
- A Multifractal Walk down Wall StreetScientific American, 1999
- The Variation of Certain Speculative PricesThe Journal of Business, 1963