Scaling theory of temporal correlations and size dependent fluctuations in the traded value of stocks

Zoltan Eisler and Janos Kertesz

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Abstract: Records of the traded value f_i(t) of stocks display fluctuation scaling, a proportionality between the standard deviation sigma(i) and the average : sigma(i) ~ f(i)^alpha, with a strong time scale dependence alpha(dt). The non-trivial (i.e., neither 0.5 nor 1) value of alpha may have different origins and provides information about the microscopic dynamics. We present a set of recently discovered stylized facts, and then show their connection to such behavior. The functional form alpha(dt) originates from two aspects of the dynamics: Stocks of larger companies both tend to be traded in larger packages, and also display stronger correlations of traded value.

Date: 2005-10, Revised 2006-05
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Published in Phys. Rev. E 73, 046109 (2006)

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