Temporal structure and gain/loss asymmetry for real and artificial stock indices

Details Temporal structure and gain/loss asymmetry for real and artificial stock indices Temporal structure and gain/loss asymmetry for real and artificial stock indices

2009-07-03

arxiv.org/abs/0907.0554v1

Phys. Rev. E 80, 057102 (2009)

Economy

Quantitative Finance

Statistical Finance

Scientific paper

10.1103/PhysRevE.80.057102

We demonstrate that the gain/loss asymmetry observed for stock indices vanishes if the temporal dependence structure is destroyed by scrambling the time series. We also show that an artificial index constructed by a simple average of a number of individual stocks display gain/loss asymmetry - this allows us to explicitly analyze the dependence between the index constituents. We consider mutual information and correlation based measures and show that the stock returns indeed have a higher degree of dependence in times of market downturns than upturns.

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