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

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

2005-10-07

arxiv.org/abs/physics/0510058v3

Phys. Rev. E 73, 046109 (2006)

Physics

Physics and Society

8 pages, 7 figures, 1 table, accepted to Phys. Rev. E

Scientific paper

10.1103/PhysRevE.73.046109

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.

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