Parameter estimation and forecasting for multiplicative log-normal cascades.
We study the well-known multiplicative log-normal cascade process in which the multiplication of Gaussian and log normally distributed random variables yields time series with intermittent bursts of activity. Due to the nonstationarity of this process and the combinatorial nature of such a formalism, its parameters have been estimated mostly by fitting the numerical approximation of the associated non-Gaussian probability density function to empirical data, cf. Castaing et al. [Physica D 46, 177 (1990)]. More recently, alternative estimators based upon various moments have been proposed by Beck [Physica D 193, 195 (2004)] and Kiyono et al. [Phys. Rev. E 76, 041113 (2007)]. In this paper, we pursue this moment-based approach further and develop a more rigorous generalized method of moments (GMM) estimation procedure to cope with the documented difficulties of previous methodologies. We show that even under uncertainty about the actual number of cascade steps, our methodology yields very reliable results for the estimated intermittency parameter. Employing the Levinson-Durbin algorithm for best linear forecasts, we also show that estimated parameters can be used for forecasting the evolution of the turbulent flow. We compare forecasting results from the GMM and Kiyono et al.'s procedure via Monte Carlo simulations. We finally test the applicability of our approach by estimating the intermittency parameter and forecasting of volatility for a sample of financial data from stock and foreign exchange markets.
Department of Economics, University of Kiel, Kiel 24118, Germany.
Andrés E
AE
Leövey
Thomas
T
Lux
D000465:Algorithms; D001703:Biophysics / Q000379:methods*; D003132:Commerce; D005544:Forecasting; D006801:Humans; D008390:Markov Chains; D015233:Models, Statistical; D009010:Monte Carlo Method; D017711:Nonlinear Dynamics; D016011:Normal Distribution; D009716:Numerical Analysis, Computer-Assisted; D010825:Physics / Q000379:methods; D011336:Probability; D013269:Stochastic Processes; D013997:Time Factors