Large price changes on small scales

Details Large price changes on small scales Large price changes on small scales

2004-01-06

arxiv.org/abs/cond-mat/0401055v2

Physics

Condensed Matter

Statistical Mechanics

6 pages, 2 figures, APFA4 conference proceedings, to be published in Physica A, references updated

Scientific paper

10.1016/j.physa.2004.06.121

In this study we examine the evolution of price, volume, and the bid-ask spread after extreme 15 minute intraday price changes on the NYSE and the NASDAQ. We find that due to strong behavioral trading there is an overreaction. Furthermore we find that volatility which increases sharply at the event decays according to a power law with an exponent of approximately 0.4, i.e., much faster than the autocorrelation function of volatility.

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