EconPapers    
Economics at your fingertips  
 

The market nanostructure origin of asset price time reversal asymmetry

Marcus Cordi, Damien Challet () and Serge Kassibrakis

Papers from arXiv.org

Abstract: We introduce a framework to infer lead-lag networks between the states of elements of complex systems, determined at different timescales. As such networks encode the causal structure of a system, infering lead-lag networks for many pairs of timescales provides a global picture of the mutual influence between timescales. We apply our method to two trader-resolved FX data sets and document strong and complex asymmetric influence of timescales on the structure of lead-lag networks. Expectedly, this asymmetry extends to trader activity: for institutional clients in our dataset, past activity on timescales longer than 3 hours is more correlated with future activity at shorter timescales than the opposite (Zumbach effect), while a reverse Zumbach effect is found for past timescales shorter than 3 hours; retail clients have a totally different, and much more intricate, structure of asymmetric timescale influence. The causality structures are clearly caused by markedly different behaviors of the two types of traders. Hence, market nanostructure, i.e., market dynamics at the individual trader level, provides an unprecedented insight into the causality structure of financial markets, which is much more complex than previously thought.

New Economics Papers: this item is included in nep-mst
Date: 2019-01
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://arxiv.org/pdf/1901.00834 Latest version (application/pdf)

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:arx:papers:1901.00834

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().

 
Page updated 2019-06-04
Handle: RePEc:arx:papers:1901.00834