Multifractal analysis of Asian markets during 2007–2008 financial crisis

• We study the US and Asian markets during 2007–2008 crisis triggered by the US subprime loans.
• A study of markets during a crisis could reveal important information about their dynamics.
• Markets of the US, Japan, Hong Kong, Korea and Indonesia show strong nonlinearities for positive qq.
• These nonlinearities are due to long range correlations of large fluctuations in returns.
• The tail exponent of the cumulative log return distribution decreases during the crisis period.

2007–2008 US financial crisis adversely affected the stock markets all over the world.  Asian markets also came under pressure and were differently affected. As markets under stress could reveal features that remain hidden under normal conditions, we use MF-DFA technique to investigate the multifractal structure of the US and seven Asian stock markets during the crisis period. The overall period of study, from 01 July 2002 to 31 December 2013, is divided into three sub-periods: pre-crisis period, crisis period and post-crisis period. We find during the crisis period markets of the US, Japan, Hong Kong, S. Korea and Indonesia show very strong non-linearity for positive values of the moment qq. We calculate the singularity spectra, f(α)f(α) for the three sub-periods for all markets. During the crisis period, we observe that the peaks of the f(α)f(α) spectra shift to lower values of αα and markets of the US, Japan, Hong Kong, Korea and Indonesia exhibit increased long range correlations of large fluctuations in index returns. We also study the impact of the crisis on the power law exponent in the tail region of the cumulative return distribution and find that by excluding the crisis period from the overall data sets, the tail exponent increases across all markets.