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Long Term Trends and Hurst Phenomena: T T y y y y S
Long Term Trends and Hurst Phenomena: T T y y y y S
,
2
), , (
2
n n N s
d
n
) / , (
2
N N y
d
N
2
d
N
D
(17-8)
(17-9)
(17-10)
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4
with probability 1. Further with where 0 < t < 1, we have
where is the standard Brownian process with auto-correlation
function given by min To make further progress note that
so that
Hence by the functional central limit theorem, using (17-3) and
(17-4) we get
, Nt n =
) ( lim lim t B
N
Nt s
N
n s
d
Nt
N
n
N
(17-11)
) (t B
). , (
2 1
t t
) ( ) (
) (
N s
N
n
n s
y n n s y n s
N n
N n N n
=
=
(17-12)
( ) (1), 0 t 1.
d
n N n N
s ny s n s N n
B t tB
N
N N N
= < <
(17-13)
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5
where Q is a strictly positive random variable with finite variance.
Together with (17-10) this gives
a result due to Feller. Thus in the case of i.i.d. random variables the
rescaled range statistic is of the order of It
follows that the plot of versus log N should be linear
with slope H = 0.5 for independent and identically distributed
observations.
0 1 0 1
max{ ( ) (1)} min{ ( ) (1)} ,
d
N N
t t
u v
B t tB B t tB Q
N
< < < <
, Q N
v u
D
R
d
N N
N
N
N N
D R /
). (
2 / 1
N O
) / log(
N N
D R
(17-14)
(17-15)
) / log(
N
N
D R
N log
Slope=0.5
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6
The hydrologist Harold Erwin Hurst (1951) generated
tremendous interest when he published results based on water level
data that he analyzed for regions of the Nile river which showed that
Plots of versus log N are linear with slope
According to Fellers analysis this must be an anomaly if the flows are
i.i.d. with finite second moment.
The basic problem raised by Hurst was to identify circumstances
under which one may obtain an exponent for N in (17-15).
The first positive result in this context was obtained by Mandelbrot
and Van Ness (1968) who obtained under a strongly
dependent stationary Gaussian model. The Hurst effect appears for
independent and non-stationary flows with finite second moment also.
In particular, when an appropriate slow-trend is superimposed on
a sequence of i.i.d. random variables the Hurst phenomenon reappears.
To see this, we define the Hurst exponent fora data set to be H if
) / log(
N N
D R
. 75 . 0 H
2 / 1 > H
2 / 1 > H
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7
where Q is a nonzero real valued random variable.
IID with slow Trend
Let be a sequence of i.i.d. random variables with common mean
and variance and be an arbitrary real valued function
on the set of positive integers setting a deterministic trend, so that
represents the actual observations. Then the partial sum in (17-1)
becomes
where represents the running mean of the slow trend.
From (17-5) and (17-17), we obtain
, , N Q
N D
R
d
H
N
N
(17-16)
} {
n
X
,
2
n
g
n n n
g x y + =
(17-17)
) (
1
2 1 2 1
n n
n
i
i n n n
g x n
g x x x y y y s
+ =
+ + + + = + + + =
=
" "
(17-18)
=
=
n
i
i n
g n g
1
/ 1
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8
Since are i.i.d. random variables, from (17-10) we get
Further suppose that the deterministic sequence
converges to a finite limit c. Then their Caesaro means
also converges to c. Since
applying the above argument to the sequence and
we get (17-20) converges to zero. Similarly, since
). )( (
2
) (
1
) )( (
2
) (
1
) (
1
) (
1
1
2
1
2
1 1 1
2 2
2
1
N n N n
N
n
N
N
n
n X
N n
N
n
N n
N
n
N
n
N n N n
N
N
n
n N
g g x x
N
g g
N
g g x x
N
g g
N
x x
N
y y
N
D
+ + =
+ + =
=
= =
= = =
=
(17-19)
} {
n
x
.
2 2
d
X
} {
n
g
N
N
n
n N
g g =
=1
1
, ) ( ) (
1
) (
1
2
1
2 2
1
c g c g
N
g g
N
N
N
n
n N n
N
n
=
= =
(17-20)
2
) ( c g
n
2
) ( c g
N
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9
by Schwarz inequality, the first term becomes
But and the Caesaro means
Hence the first term (17-21) tends to zero as and so does the
second term there. Using these results in (17-19), we get
To make further progress, observe that
= =
=
N
n
N N n n N n N n
N
n
c g x c g x
N
g g x x
N
1 1
), )( ( ) )( (
1
) )( (
1
. ) (
1
) (
1
) )( (
1
1
2 2
1
2
1
= = =
N
n
n
N
n
n
N
n
n n
c g
N
x
N
c g x
N
(17-21)
(17-22)
2
1
2
1
) (
=
N
n
n N
x . 0 ) (
1
2
1
=
N
n
n N
c g
, N
.
2
d
N n
D c g
(17-23)
(17-24)
)} ( { max )} ( { max
)} ( ) ( { max
} { max
0 0
N n
N n
N n
N n
N n N n
N n N
g g n x x n
g g n x x n
g n s u
+
+ =
=
< < < <
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10
and
Consequently, if we let
for the i.i.d. random variables, then from (17-6),(17-24) and (17-25)
(17-26), we obtain
where
From (17-24) (17-25), we also obtain
)}. ( { min )} ( { min
)} ( ) ( { min
} { min
0 0
N n
N n
N n
N n
N n N n
N n N
g g n x x n
g g n x x n
g n s v
+
+ =
=
< < < <
)} ( { min )} ( { max
0 0
N n
N n
N n
N n
N
x x n x x n r =
< < < <
(17-25)
(17-26)
N N N N N
G r v u R + =
(17-27)
)} ( { min )} ( { max
0 0
N n
N n
N n
N n
N
g g n g g n G =
< < < <
(17-28)
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11
From (17-27) and (17-31) we get the useful estimates
and
Since are i.i.d. random variables, using (17-15) in (17-26) we get
a positive random variable, so that
)}, ( { min )} ( { max
0 0
N n
N n
N n
N n
N
g g n x x n v +
< < < <
)}, ( { max )} ( { min
0 0
N n
N n
N n
N n
N
g g n x x n u +
< < < <
.
N N N
r G R
(17-29)
(17-30)
(17-31)
,
N N N
r G R
.
N N N
G r R
(17-32)
(17-33)
} {
n
x
y probabilit in Q
N
r
N
r
N
X
N
,
2
(17-34)
y. probabilit in Q N
r
N
(17-35)
hence and )] ( max ) ( min } ) min {( max )} {( max [use
i
i
i
i
i i
i i
i i
i
y x y x y x + = + +
PILLAI
12
Consequently for the sequence in (17-17) using (17-23)
in (17-32)-(17-34) we get
if H > 1/2. To summarize, if the slow trend converges to a finite
limit, then for the observed sequence for every H > 1/2
in probability as
In particular it follows from (17-16) and (17-36)-(17-37) that
the Hurst exponent H > 1/2 holds for a sequence if and only
if the slow trend sequence satisfies
} {
n
y
0
/
2 / 1
H H
N
H
N
N N
N
Q
N
r
N D
G R
(17-36)
} {
n
g
}, {
n
y
0
H
N
H
N
N
H
N
N
H
N
N
N
G
N D
R
N D
G
N D
R
(17-37)
. N
} {
n
y
} {
n
g
. 2 / 1 , 0 lim
0
> > =
H c
N
G
H
N
N
(17-38)
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13
In that case from (17-37), for that H > 1/2 we obtain
where is a positive number.
Thus if the slow trend satisfies (17-38) for some H > 1/2,
then from (17-39)
Example: Consider the observations
where are i.i.d. random variables. Here and the
sequence converges to a for so that the above result applies. Let
, /
0
N as y probabilit in c
N D
R
H
N
N
(17-39)
0
c
} {
n
g
. as , log log + N c N H
D
R
N
N
(17-40)
1 , + + = n bn a x y
n n
(17-41)
n
x ,
bn a g
n
+ =
, 0 <
. ) (
1 1
|
.
|
\
|
= =
= =
N
k
n
k
N n n
k
N
n
k b g g n M
(17-42)
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To obtain its max and min, notice that
if and negative otherwise. Thus max is achieved
at
and the minimum of is attained at N=0. Hence from (17-28)
and (17-42)-(17-43)
Now using the Reimann sum approximation, we may write
N
M
, ) (
/ 1
1
1
=
<
N
k
N
k n
/ 1
1
0
1
|
.
|
\
|
=
=
N
k
k
N
n
(17-44)
0
1
1
1
>
|
.
|
\
|
=
=
N
k
n n
k
N
n b M M
(17-43)
0 =
N
M
.
1
0
1
0
|
.
|
\
|
=
= =
N
k
n
k
N
k
N
n
k b G
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15
so that
and using (17-45)-(17-46) repeatedly in (17-44) we obtain
<
=
> +
1 ,
1 ,
log
1 , ) 1 (
/ 1
1
/ 1
0
N
k
N
N
N
n
k
(17-46)
<
=
> +
=
=
1 ,
1 ,
log
1 , ) 1 (
1 1
1
1
0
1
N
k
N
N
N
dx x
N
k
N
k
N
N
k
(17-45)
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16
where are positive constants independent of N. From (17-47),
notice that if then
where and hence (17-38) is satisfied. In that case
3 2 1
, , c c c
, 0 2 / 1 < <
<
|
.
|
\
|
|
.
|
\
|
=
|
|
.
|
\
|
>
+
|
|
.
|
\
|
=
=
+
= =
1 , 1
1 , log log
1
log
1
1 , ) (
1
1 1
3
1
0
2 0
0
0
1
1 0
0
1 1
0
0
0
c k
N
n
b
N c N
N
n
n
bn
N c N n
bn
k
N
k
n
bn G
k
N
k
n
k
n
(17-47)
, ~
1
H
n
N c G
1 2 / 1 < < H
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17
and the Hurst exponent
Next consider In that case from the entries in
(17-47) we get and diving both sides of (17-33)
with
so that
where the last step follows from (17-15) that is valid for i.i.d.
observations. Hence using a limiting argument the Hurst exponent
.
1
) 1 (
+
N as y probabilit in c
N D
R
N
N
(17-48)
), (
2 / 1
N o G
N
=
. 2 / 1 <
,
2 / 1
N D
N
y probabilit in
N
N o
N D
r R
N
N N
0
) (
~
2 / 1
2 / 1
2 / 1
Q
N
r
N D
R
N
N
N
2 / 1 2 / 1
~
(17-49)
. 2 / 1 1 > + = H
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18
H = 1/2 if Notice that gives rise to i.i.d.
observations, and the Hurst exponent in that case is 1/2. Finally for
the slow trend sequence does not converge and
(17-36)-(17-40) does not apply. However direct calculation shows
that in (17-19) is dominated by the second term which for
large N can be approximated as so that
From (17-32)
where the last step follows from (17-34)-(17-35). Hence for
from (17-47) and (17-50)
. 2 / 1 0 =
} {
n
g
N
D
2
0
2
1
N x
N
N
N as N c D
N
4
(17-50)
0
1
4
N c
Q N
N D
r
N D
G R
N
N
N
N N
0 >
, 0 >
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19
as Hence the Hurst exponent is 1 if In summary,
4
1
1
4
1
1
c
c
N c
N c
N D
G
N D
R
N
N
N
N
+
+
. N . 0 >
<
> > +
=
>
=
-1/2 2 / 1
-1/2 0 1
0 2 / 1
0 1
) (
H
(17-51)
(17-52)
Fig.1 Hurst exponent for a process with superimposed slow trend
1/2
1
-1/2
0
) ( H
Hurst
phenomenon
PILLAI