Volatility of linear and nonlinear time series

Phys Rev E Stat Nonlin Soft Matter Phys. 2005 Jul;72(1 Pt 1):011913. doi: 10.1103/PhysRevE.72.011913. Epub 2005 Jul 21.

Abstract

Previous studies indicated that nonlinear properties of Gaussian distributed time series with long-range correlations, u(i), can be detected and quantified by studying the correlations in the magnitude series |u(i)|, the "volatility." However, the origin for this empirical observation still remains unclear and the exact relation between the correlations in u(i) and the correlations in |u(i)| is still unknown. Here we develop analytical relations between the scaling exponent of linear series u(i) and its magnitude series |u(i)|. Moreover, we find that nonlinear time series exhibit stronger (or the same) correlations in the magnitude time series compared with linear time series with the same two-point correlations. Based on these results we propose a simple model that generates multifractal time series by explicitly inserting long range correlations in the magnitude series; the nonlinear multifractal time series is generated by multiplying a long-range correlated time series (that represents the magnitude series) with uncorrelated time series [that represents the sign series sgn (u(i))]. We apply our techniques on daily deep ocean temperature records from the equatorial Pacific, the region of the El-Ninõ phenomenon, and find: (i) long-range correlations from several days to several years with 1/f power spectrum, (ii) significant nonlinear behavior as expressed by long-range correlations of the volatility series, and (iii) broad multifractal spectrum.

Publication types

  • Research Support, Non-U.S. Gov't

MeSH terms

  • Biophysics / methods*
  • Data Interpretation, Statistical
  • Fractals
  • Models, Statistical
  • Models, Theoretical
  • Nonlinear Dynamics
  • Normal Distribution
  • Oceans and Seas
  • Stochastic Processes
  • Temperature
  • Time
  • Time Factors