On a universal mechanism for long ranged volatility correlations

Details On a universal mechanism for long ranged volatility correlations On a universal mechanism for long ranged volatility correlations

2000-12-09

arxiv.org/abs/cond-mat/0012156v2

Physics

Condensed Matter

Minor details changed, and Figure 4 improved

Scientific paper

We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated to random-walk like processes. We numerically demonstrate our scenario in the framework of simplified market models, such as the Minority Game model with an inactive strategy. We show that real market data can be surprisingly well accounted for by these simple models.

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