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More specifically, I am looking for recent research papers that have harnessed Mandelbrot's ideas too successfully predict asset prices. I have read many papers about wavelets, and I would like to read what other people (you) consider to be the best work in this field.

Are wavelets the only analyses currently in development that use Mandelbrot's ideas?

Thanks.

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  • $\begingroup$ well two misconceptions here, 1)can people successfully predict? 2)do markets move in fractals? $\endgroup$ – pyCthon Aug 24 '13 at 19:53
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The best known multifractal process is Fractional Brownian Motion. One needs to estimate the Hurst exponent, which can be more tricky than it seems. However the fBM distributional characteristics do not match the main stylised facts, e.g. the thinning of tails for longer horizons, so they are not so much used in practice. There are also extensions accounting for stochastic volatility, leading to a curious hybrid.

Mandelbrot's work has opened an interesting line of research, but its fruits are not so tasty as hoped at first: markets display some self-similarity, but not a full one. After many decades it's still mostly an academic topic. Iirc the only market where multifractals seem to bring something is FX.

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