Price fluctuations and market activity

P. Gopikrishnan, V. Plerou, Xavier Gabaix, L.A.N. Amaral and H.E. Stanley

Physica A: Statistical Mechanics and its Applications, 2001, vol. 299, issue 1, 137-143

Abstract: We empirically quantify the relation between trading activity—measured by the number of transactions N—and the price change G(t) for a given stock, over a time interval [t,t+Δt]. We relate the time-dependent standard deviation of price changes—volatility—to two microscopic quantities: the number of transactions N(t) in Δt and the variance W2(t) of the price changes for all transactions in Δt. We find that the long-ranged volatility correlations are largely due to those of N. We then argue that the tail-exponent of the distribution of N is insufficient to account for the tail-exponent of P{G>x}. Since N and W display only weak inter-dependency, our results show that the fat tails of the distribution P{G>x} arises from W, which has a distribution with power-law tail exponent consistent with our estimates for G.

Keywords: Anomalous diffusion; Stochastic volatility; Subordinate processes; Econophysics (search for similar items in EconPapers)
Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (65)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:299:y:2001:i:1:p:137-143

DOI: 10.1016/S0378-4371(01)00288-6

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