Rescaled Range Analysis

Rescaled Range Analysis

A method of analysis of financial information over time to see what patterns, if any, arise. Theoretically, R/S analysis can be useful to determine potential future price movements for a stock or future performance for a company, but critics contend that its accuracy is limited.
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In this study, we estimate the fractal dimension of price returns and test the Efficient Market Hypothesis (EMH), employing rescaled range analysis in order to use fewer assumptions about the underlying system.
It is also recommended that investors, financial practitioners and academicians apply the rescaled range analysis, and soft computing to financial time series.
In the theory of chaotic systems different methods are used [5], among others such as: correlation dimension [15]; Kolmogorov entropy, Lapunov exponent, fractal dimension [13]; Brock-Dechert-Scheinkman's test, rescaled range analysis [8,9,10,12].
In order to illustrate the application of the rescaled range analysis with CAS Mathematica I have used the data of New York Stock Exchange (NYSE) index S&P500, which consists of 500 companies of the highest capitalization.
In the rescaled range analysis one divides the data into equal intervals, changing their length in the consecutive steps.
The work presented in this paper was conducted to compare the suitability of statistical, mutual information function, spectral and Hurst's Rescaled Range analysis for discrimination of flow regime transitions in a semi-cylindrical gas-solid spouted bed.
Several analysis methods were utilized: statistical, spectral analysis, mutual information, Hurst rescaled range analysis, and the P statistic, in order to evaluate their usefulness for characterization of flow regimes.
This work presents an application of rescaled range analysis (R/S) to study the fractal properties of precipitation in Venezuela.
The two tools employed for further evaluation are the rescaled range analysis and the three moments test.
Table 7 reports the results of the rescaled range analysis for each examined foreign exchange rate movement series.
The Rescaled Range analysis is based on the simple hypothesis that any IID data would show an increase in standardized ranges which are proportional to increase in sample sizes as samples of increasing subperiod lengths are considered.
The rescaled range analysis provides no strong indication of long-term dependency in the returns of any of the examined indexes.