Coherence resonance-like and efficiency of financial market

Guang-Yan Zhong, Feng He, Jiang-Cheng Li, Dong-Cheng Mei and Nian-Sheng Tang

Physica A: Statistical Mechanics and its Applications, 2019, vol. 534, issue C

Abstract: We study the coherent resonance phenomenon of stock market returns and volatility and discuss the effectiveness of financial market based on the coherent resonance theory of statistical physics. In this paper, we use the Heston model to give the series describing the return and volatility. Considering the limited data of CSI 300 index, the Bayesian estimation parameters of the proposed model are given by combining Bayesian parameter estimation and realized volatility. The characteristic correlation time (CCT) and normalized fluctuations of pulse durations Rp are employed to further explore the coherent resonance behavior of stock market price returns and volatility. Based on the stochastic simulation of the estimated parameters, we can observe the phenomena of coherent resonance-like and anti-coherent resonance in CCT and Rp as a function of long-run variance and amplitude of volatility. We can also observe the critical phenomenon, there is a critical mean reversion of volatility. On both sides of the critical value, the opposite characteristics of coherent and anti-coherent resonance can be observed. The enhanced long-run variance of volatility and weakened amplitude of volatility both cause coherent-like resonance in CCT and Rp vs. the mean reversion of volatility. In addition, it can be seen that the market efficiency is lower when coherent resonance occurs, and higher when anti-coherence resonance occurs.

Keywords: Coherence resonance; Econophysics; Stochastic simulation; Characteristic correlation time; Bayesian estimation (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437119313433
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:534:y:2019:i:c:s0378437119313433

DOI: 10.1016/j.physa.2019.122327

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().