Relaxation dynamics of aftershocks after large volatility shocks in the SSEC index

Guo-Hua Mu and Wei-Xing Zhou

Physica A: Statistical Mechanics and its Applications, 2008, vol. 387, issue 21, 5211-5218

Abstract: The relaxation dynamics of aftershocks after large volatility shocks are investigated based on two high-frequency data sets of the Shanghai Stock Exchange Composite (SSEC) index. Compared with previous relevant work, we have defined main financial shocks based on large volatilities rather than large crashes. We find that the occurrence rate of aftershocks with the magnitude exceeding a given threshold for both daily volatility (constructed using 1-minute data) and minutely volatility (using intra-minute data) decays as a power law. The power-law relaxation exponent increases with the volatility threshold and is significantly greater than 1. Taking financial volatility as the counterpart of seismic activity, the power-law relaxation in financial volatility deviates remarkably from the Omori law in Geophysics.

Keywords: Econophysics; Chinese stock market; Power-law relaxation; Omori law; Volatility dynamics (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (11)

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Working Paper: Relaxation dynamics of aftershocks after large volatility shocks in the SSEC index (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:387:y:2008:i:21:p:5211-5218

DOI: 10.1016/j.physa.2008.05.019

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