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6
votes
0answers
278 views

Can Hurst exponent be used to characterize nonlinear dependence in time series?

It appears to me that the answer is no, because Hurst exponent measures persistence in terms of autocorrelation, which is a linear measure. So even if a time series of asset returns is driven by ...
4
votes
0answers
67 views

Is Least Median Squares (LMS) regression commonly used in Finance?

Least Median Squares is often argued to give more stable results than does OLS. Whereas in OLS one minimises the mean of squared residuals, in LMS, one instead minimises the median of squared ...
1
vote
0answers
58 views

Calculating the Hedge Ratio

Suppose we have an index whose value is calculated by a weighted geometric mean. Now we want to recreate the index using its underlying components. How would we go about calculating the hedge ratios ...