Time-scale effects on the gain-loss asymmetry in stock indices

Bulcs\'u S\'andor, Ingve Simonsen, B\'alint Zsolt Nagy and Zolt\'an N\'eda

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Abstract: The gain-loss asymmetry, observed in the inverse statistics of stock indices is present for logarithmic return levels that are over $2\%$, and it is the result of the non-Pearson type auto-correlations in the index. These non-Pearson type correlations can be viewed also as functionally dependent daily volatilities, extending for a finite time interval. A generalized time-window shuffling method is used to show the existence of such auto-correlations. Their characteristic time-scale proves to be smaller (less than $25$ trading days) than what was previously believed. It is also found that this characteristic time-scale has decreased with the appearance of program trading in the stock market transactions. Connections with the leverage effect are also established.

Date: 2016-08, Revised 2016-08
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Citations: View citations in EconPapers (4)

Published in Phys. Rev. E 94, 022311 (2016)

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