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Abstract

We present a exactly soluble model for financial time series that mimics the long range volatility correlations known to be present in financial data. Although our model is asymptotically `monofractal' by construction, it shows apparent multiscaling as a result of a slow crossover phenomenon on finite time scales. Our results suggest that it might be hard to distinguish apparent and true multifractal behavior in financial data. Our model also leads to a new family of stable laws for sums of correlated random variables.

PACS. 02.50.-r Probability theory, stochastic processes, and statistics – 05.40.-a Fluctuation phenomena, random processes, noise, and Brownian motion – 89.90.+n Other topics of general interest to physicists (restricted to new topics in section 89)

Received 30 June 1999