Cointegration of Stochastic Multifractals with Application to Foreign Exchange Rates
The existing concept of cointegration applies to integrated processes (in the Box-Jenkins ARIMA framework) or processes with long-range dependence. These processes are assumed to display a monoscaling behaviour (such as that of a fractional Brownian motion). On the other hand, many turbulent processes are known to be intermittent, hence possess multiscaling characteristics. This paper develops a concept of cointegration for these stochastic multifractals. A model is suggested for testing for cointegration and applied to the exchange rates of three major currencies.
International Transactions in Operational Research
TSE, Yiu Kuen; Anh, V. V.; and Tieng, Q. M..
Cointegration of Stochastic Multifractals with Application to Foreign Exchange Rates. (2000). International Transactions in Operational Research. 7, (4-5), 349-363. Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/431