Cross-correlations between volume change and price change

Economy – Quantitative Finance – Statistical Finance

Scientific paper

Rate now

  [ 0.00 ] – not rated yet Voters 0   Comments 0

Details

7 pages, 5 figures

Scientific paper

10.1073/pnas.0911983106

In finance, one usually deals not with prices but with growth rates $R$, defined as the difference in logarithm between two consecutive prices. Here we consider not the trading volume, but rather the volume growth rate $\tilde R$, the difference in logarithm between two consecutive values of trading volume. To this end, we use several methods to analyze the properties of volume changes $|\tilde R|$, and their relationship to price changes $|R|$. We analyze $14,981$ daily recordings of the S\&P 500 index over the 59-year period 1950--2009, and find power-law {\it cross-correlations\/} between $|R|$ and $|\tilde R|$ using detrended cross-correlation analysis (DCCA). We introduce a joint stochastic process that models these cross-correlations. Motivated by the relationship between $| R|$ and $|\tilde R|$, we estimate the tail exponent ${\tilde\alpha}$ of the probability density function $P(|\tilde R|) \sim |\tilde R|^{-1 -\tilde\alpha}$ for both the S\&P 500 index as well as the collection of 1819 constituents of the New York Stock Exchange Composite index on 17 July 2009. As a new method to estimate $\tilde\alpha$, we calculate the time intervals $\tau_q$ between events where $\tilde R>q$. We demonstrate that $\bar\tau_q$, the average of $\tau_q$, obeys $\bar \tau_q \sim q^{\tilde\alpha}$. We find $\tilde \alpha \approx 3$. Furthermore, by aggregating all $\tau_q$ values of 28 global financial indices, we also observe an approximate inverse cubic law.

No associations

LandOfFree

Say what you really think

Search LandOfFree.com for scientists and scientific papers. Rate them and share your experience with other people.

Rating

Cross-correlations between volume change and price change does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.

If you have personal experience with Cross-correlations between volume change and price change, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Cross-correlations between volume change and price change will most certainly appreciate the feedback.

Rate now

     

Profile ID: LFWR-SCP-O-431173

All data on this website is collected from public sources. Our data reflects the most accurate information available at the time of publication.