Paper: arXiv 2509.19663

Authors: Yifan He, Svetlozar Rachev

Abstract

This study presents a comprehensive empirical investigation of the presence of long-range dependence (LRD) in the dynamics of major U.S. stock market indexes–S&P 500, Dow Jones, and Nasdaq–at daily, weekly, and monthly frequencies. We employ three distinct methods: the classical rescaled range (R/S) analysis, the more robust detrended fluctuation analysis (DFA), and a sophisticated ARFIMA–FIGARCH model with Student’s $t$-distributed innovations. Our results confirm the presence of LRD, primarily driven by long memory in volatility rather than in the mean returns. Building on these findings, we explore the capability of a modern deep learning approach, Quant generative adversarial networks (GANs), to learn and replicate the LRD observed in the empirical data. While Quant GANs effectively capture heavy-tailed distributions and some aspects of volatility clustering, they suffer from significant limitations in reproducing the LRD, particularly at higher frequencies. This work highlights the challenges and opportunities in using data-driven models for generating realistic financial time series that preserve complex temporal dependencies.

Complexity vs Empirical Score

  • Math Complexity: 7.5/10
  • Empirical Rigor: 6.0/10
  • Quadrant: Holy Grail — high math complexity, high empirical rigor

Why this score: The paper employs advanced statistical and econometric methods like ARFIMA–FIGARCH models and deep learning (Quant GANs), indicating high mathematical density, while its reliance on real-world financial data and backtesting-like simulation analysis shows strong empirical components.

Research Flowchart

  flowchart TD
  A["Research Goal:<br>Investigate LRD in U.S. Stock Markets"] --> B["Data Collection:<br>S&P 500, DJI, NASDAQ"]
  B --> C["Methodology:<br>R/S, DFA, ARFIMA-FIGARCH"]
  C --> D["Process: <br>Empirical Analysis of Returns & Volatility"]
  D --> E{"Finding 1:<br>Presence of LRD?"}
  E -->|Yes| F["Outcome:<br>LRD driven by Volatility"]
  E -->|No| G["Outcome:<br>No Significant LRD"]
  F --> H["Generative Modeling:<br>Quant GANs"]
  G --> H
  H --> I{"Outcome 2:<br>Can GANs replicate LRD?"}
  I -->|Limited| J["Finding:<br>GANs fail to capture LRD,<br>especially at high frequencies"]
  I -->|Yes| K["Finding:<br>GANs successfully replicate LRD"]

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0 of 32 cited works are in the corpus; resolved via arXiv source bundles, Semantic Scholar and OpenAlex. Corpus-wide: 2518 linked papers.