Assessing market uncertainty by means of a time-varying intermittency parameter for asset price fluctuations

Maximum likelihood estimation techniques for multifractal processes are applied to high-frequency data in order to quantify intermittency in the fluctuations of asset prices. From time records as short as one month these methods permit extraction of a meaningful intermittency parameter λ characterising the degree of volatility clustering. We can therefore study the time evolution of volatility clustering and test the statistical significance of this variability. By analysing data from the Oslo Stock Exchange, and comparing the results with the investment grade spread, we find that the estimates of λ are lower at times of high market uncertainty.