Effects of long memory in the order submission process on the properties of recurrence intervals of large price fluctuations

Economy – Quantitative Finance – Statistical Finance

Scientific paper

Rate now

  [ 0.00 ] – not rated yet Voters 0   Comments 0

Details

6 EPL pages including 6 figures

Scientific paper

Understanding the statistical properties of recurrence intervals of extreme events is crucial to risk assessment and management of complex systems. The probability distributions and correlations of recurrence intervals for many systems have been extensively investigated. However, the impacts of microscopic rules of a complex system on the macroscopic properties of its recurrence intervals are less studied. In this Letter, we adopt an order-driven stock market model to address this issue for stock returns. We find that the distributions of the scaled recurrence intervals of simulated returns have a power law scaling with stretched exponential cutoff and the intervals possess multifractal nature, which are consistent with empirical results. We further investigate the effects of long memory in the directions (or signs) and relative prices of the order flow on the characteristic quantities of these properties. It is found that the long memory in the order directions (Hurst index $H_s$) has a negligible effect on the interval distributions and the multifractal nature. In contrast, the power-law exponent of the interval distribution increases linearly with respect to the Hurst index $H_x$ of the relative prices, and the singularity width of the multifractal nature fluctuates around a constant value when $H_x<0.7$ and then increases with $H_x$. No evident effects of $H_s$ and $H_x$ are found on the long memory of the recurrence intervals. Our results indicate that the nontrivial properties of the recurrence intervals of returns are mainly caused by traders' behaviors of persistently placing new orders around the best bid and ask prices.

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

Effects of long memory in the order submission process on the properties of recurrence intervals of large price fluctuations 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 Effects of long memory in the order submission process on the properties of recurrence intervals of large price fluctuations, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Effects of long memory in the order submission process on the properties of recurrence intervals of large price fluctuations will most certainly appreciate the feedback.

Rate now

     

Profile ID: LFWR-SCP-O-153375

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