# Computational experiments successfully predict the emergence of autocorrelations in ultra-high-frequency stock returns

*Jian Zhou*,
*Gao-Feng Gu*,
*Zhi-Qiang Jiang*,
*Xiong Xiong*,
*Wei Chen*,
*Wei Zhang* and
*Wei-Xing Zhou*

Additional contact information

Jian Zhou: ECUST

Gao-Feng Gu: ECUST

Zhi-Qiang Jiang: ECUST

Xiong Xiong: TJU

Wei Chen: SZSE

Wei Zhang: TJU

Papers from arXiv.org

**Abstract:**
Social and economic systems are complex adaptive systems, in which heterogenous agents interact and evolve in a self-organized manner, and macroscopic laws emerge from microscopic properties. To understand the behaviors of complex systems, computational experiments based on physical and mathematical models provide a useful tools. Here, we perform computational experiments using a phenomenological order-driven model called the modified Mike-Farmer (MMF) to predict the impacts of order flows on the autocorrelations in ultra-high-frequency returns, quantified by Hurst index $H_r$. Three possible determinants embedded in the MMF model are investigated, including the Hurst index $H_s$ of order directions, the Hurst index $H_x$ and the power-law tail index $\alpha_x$ of the relative prices of placed orders. The computational experiments predict that $H_r$ is negatively correlated with $\alpha_x$ and $H_x$ and positively correlated with $H_s$. In addition, the values of $\alpha_x$ and $H_x$ have negligible impacts on $H_r$, whereas $H_s$ exhibits a dominating impact on $H_r$. The predictions of the MMF model on the dependence of $H_r$ upon $H_s$ and $H_x$ are verified by the empirical results obtained from the order flow data of 43 Chinese stocks.

**Date:** 2014-03, Revised 2018-02

**New Economics Papers:** this item is included in nep-cmp and nep-fmk

**References:** View references in EconPapers View complete reference list from CitEc

**Citations:**

**Published** in Computational Economics 50 (4), 579-594 (2017)

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Journal Article: Computational Experiments Successfully Predict the Emergence of Autocorrelations in Ultra-High-Frequency Stock Returns (2017)

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**Persistent link:** https://EconPapers.repec.org/RePEc:arx:papers:1404.1051

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