Rescaled Range Analysis

AAA

DEFINITION of 'Rescaled Range Analysis'

A statistical analysis of a time-series of financial data that attempts to find patterns that might repeat in the future. While rescaled-range analysis techniques have proved useful in other mathematical endeavors, the evidence for its use in analyzing financial data remains somewhat unproven. There are two main variables used in this technique – the range of the data (as measured by the highest and lowest values in the time period), and the standard deviation of the data. A derivative of this mathematical result is known as a Hurst exponent; if a trend actually exists in the data, this Hurst exponent can extrapolate a future value or average for the data point.

INVESTOPEDIA EXPLAINS 'Rescaled Range Analysis'

The desire to predict patterns in financial data (especially asset prices) is as old as the history of data itself. What makes the search so appealing is that stock market history does show cyclicality, albeit in a non-periodic way. Business cycle lengths seem to keep showing up in periods of four to five years, although nobody can explain why.

RELATED TERMS
  1. Business Cycle

    The fluctuations in economic activity that an economy experiences ...
  2. Standard Deviation

    1. A measure of the dispersion of a set of data from its mean. ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in ...
  4. Statistics

    A type of mathematical analysis involving the use of quantified ...
  5. Regression

    A statistical measure that attempts to determine the strength ...
  6. Homoskedastic

    A statistics term indicating that the variance of the errors ...
Related Articles
  1. Markets

    The Uses And Limits Of Volatility

    Check out how the assumptions of theoretical risk models compare to actual market performance.
  2. Investing

    The Ups And Downs Of Investing In Cyclical Stocks

    This strategy can be profitable but only if you know when to dump these stocks.
  3. Active Trading

    Market Cycles: The Key To Maximum Returns

    You need to understand the various phases of the market cycle to avoid bubbles and make the best investments.
  4. Fundamental Analysis

    What does a high weighted average cost of capital (WACC) signify?

    Find out what it means for a company to have a relatively high weighted average cost of capital, or WACC, and why this is important to lenders and investors.
  5. Fundamental Analysis

    How do economists and psychologists calculate diminishing marginal utility differently?

    Find out why disagreements about the validity of the law of diminishing marginal utility usually boil down to arguments about definitions.
  6. Fundamental Analysis

    What does the law of diminishing marginal utility explain?

    Learn about some of the important economic insights that can be derived from applications of the law of diminishing marginal utility.
  7. Trading Strategies

    How can retirees protect their wealth in a bear market?

    Look at some helpful hints about how to protect your retirement nest egg when the stock market is underperforming or the economy is in recession.
  8. Economics

    What's the relationship between r squared and beta?

    Learn about the relationship between R-squared and Beta. Explore how the concepts are related and often used in conjunction with portfolio Alpha.
  9. Economics

    What are some limitations of the consumer price index (CPI)?

    Explore some of the basic limitations of the widely used economic indicator, the consumer price index, or CPI, and examine the criticism of its accuracy.
  10. Economics

    Is the consumer price index (CPI) a cost of living index?

    Explore the consumer price index (CPI) and understand why it is not an actual cost of living index although it is often identified as one.

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center