Market mill dependence pattern in the stock market: Multiscale conditional dynamics

Sergey Zaitsev, Alexander Zaitsev, Andrei Leonidov and Vladimir Trainin

Physica A: Statistical Mechanics and its Applications, 2009, vol. 388, issue 21, 4624-4634

Abstract: Market Mill is a complex dependence pattern leading to nonlinear correlations and predictability in intraday dynamics of stock prices. The present paper puts together previous efforts to build a dynamical model reflecting the market mill asymmetries. We show that certain properties of the conditional dynamics at a single time scale such as a characteristic shape of an asymmetry-generating component of the conditional probability distribution result in the “elementary” market mill pattern. This asymmetry-generating component matches the empirical distribution obtained from the market data. Multiple time scale considerations make the resulting “composite” mill similar to the empirical market mill patterns. Multiscale model also reflects a multi-agent nature of the market. Interpretation of variations of asymmetry patterns of individual stocks in terms of specific deformations of the fundamental market mill asymmetry patterns is described.

Keywords: Econophysics; Market mill (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:388:y:2009:i:21:p:4624-4634

DOI: 10.1016/j.physa.2009.07.014

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