Anomalous volatility scaling in high frequency financial data

• Empirical mode decomposition is used to study high frequency data.
• For fractional Brownian motion, we identify a variance scaling law.
• We measure volatility at different time horizons for different stock market indices.
• Some scaling deviations are identified for the less developed financial markets.

Volatility of intra-day stock market indices computed at various time horizons exhibits a scaling behaviour that differs from what would be expected from fractional Brownian motion (fBm). We investigate this anomalous scaling by using empirical mode decomposition (EMD), a method which separates time series into a set of cyclical components at different time-scales. By applying the EMD to fBm, we retrieve a scaling law that relates the variance of the components to a power law of the oscillating period. In contrast, when analysing 22 different stock market indices, we observe deviations from the fBm and Brownian motion scaling behaviour. We discuss and quantify these deviations, associating them to the characteristics of financial markets, with larger deviations corresponding to less developed markets.