Diffusion Entropy technique applied to the study of the market activity

Luigi Palatella, Josep Perelló, Miquel Montero () and Jaume Masoliver

Physica A: Statistical Mechanics and its Applications, 2005, vol. 355, issue 1, 131-137

Abstract: The present work briefly summarizes the results obtained in Palatella et al. Eur. Phys. J. B 38 (2004) 671 using the Diffusion Entropy technique and adds some new results regarding the Dow Jones Index time series. We show that time distances between peaks of volatility or activity are distributed following an asymptotic power-law which ultimately recovers an exponential behavior. We discuss these results in comparison with the TARCH model, the Ornstein–Uhlenbeck stochastic volatility model and a multi-agent model. We conclude that both ARCH and stochastic volatility models better describe the observed experimental evidences.

Keywords: Econophysics; Diffusion entropy; Time series analysis; Activity clustering; Volatility modelling (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:355:y:2005:i:1:p:131-137

DOI: 10.1016/j.physa.2005.02.076

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