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Power-Law Cross-Correlations: Issues, Solutions and Future Challenges

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Simplicity of Complexity in Economic and Social Systems

Part of the book series: Springer Proceedings in Complexity ((SPCOM))

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Abstract

Analysis of long-range dependence in financial time series was one of the initial steps of econophysics into the domain of mainstream finance and financial economics in the 1990s. Since then, many different financial series have been analysed using the methods standardly used outside of finance to deliver some important stylized facts of the financial markets. In the late 2000s, these methods have started being generalized to bivariate settings so that the relationship between two series could be examined in more detail. It was then only a single step from bivariate long-range dependence towards scale-specific correlations and regressions as well as power-law coherency as a unique relationship between power-law correlated series. Such rapid development in the field has brought some issues and challenges that need further discussion and attention. We shortly review the development and historical steps from long-range dependence to bivariate generalizations and connected methods, focus on its technical aspects and discuss problematic parts and challenges for future directions in this specific subfield of econophysics.

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Acknowledgements

Ladislav Kristoufek gratefully acknowledges financial support of the Czech Science Foundation (project 17-12386Y).

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Authors and Affiliations

  1. Institute of Information Theory and Automation, Czech Academy of Sciences, Pod Vodarenskou vezi 4, Prague, Czech Republic

    Ladislav Kristoufek

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  1. Ladislav Kristoufek
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Correspondence to Ladislav Kristoufek .

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Editors and Affiliations

  1. Institute of Theoretical Physics, University of Wrocław, Wrocław, Poland

    Dariusz Grech

  2. Institute of Theoretical Physics, University of Wrocław, Wrocław, Poland

    Janusz Miśkiewicz

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Kristoufek, L. (2021). Power-Law Cross-Correlations: Issues, Solutions and Future Challenges. In: Grech, D., Miśkiewicz, J. (eds) Simplicity of Complexity in Economic and Social Systems. Springer Proceedings in Complexity. Springer, Cham. https://doi.org/10.1007/978-3-030-56160-4_3

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