This paper deals with the problem of estimating the pointwise regularity of multifractional Brownian motion, assumed as a model of stock price dynamics. We (a) correct the shifting bias affecting a class of absolute moment-based estimators and (b) build a data-driven algorithm in order to dynamically check the local Gaussianity of the process. The estimation is therefore performed for three stock indices: the Dow Jones Industrial Average, the FTSE 100 and the Nikkei 225. Our findings show that, after the correction, the pointwise regularity fluctuates around 1/2 (the sole value consistent with the absence of arbitrage), but significant deviations are also observed.

We propose a decomposition of financial time series into Gaussian subsequences characterized by a constant Hölder exponent. In (multi)fractal models this condition is equivalent to the subsequences themselves being stationarity. For the different subsequences, we study the scaling of the variance and the bias that is generated when the Hölder exponent is re-estimated using traditional estimators. The results achieved by both analyses are shown to be strongly consistent with the assumption that the price process can be modeled by the multifractional Brownian motion, a nonstationary process whose Hölder regularity changes from point to point.

The scaling properties of two alternative fractal models recently proposed to characterize the dynamics of stock market prices are compared. The former is the Multifractal Model of Asset Return (MMAR) introduced in 1997 by Mandelbrot, Calvet and Fisher in three companion papers. The latter is the multifractional Brownian motion (mBm), defined in 1995 by Peltier and Levy Vehel as an extension of the very well-known fractional Brownian motion (fBm). We argue that, when fitted on financial time series, the partition function as well as the scaling function of the mBm, i.e. of a generally non-multifractal process, behave as those of a genuine multifractal process. The analysis, which concerns the daily closing prices of eight major stock indexes, suggests to evaluate prudently the recent findings about the multifractal behaviour in finance and economics.Multifractals, MMAR, Multifractionality, Stock prices,

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