Related papers: Serial correlation and heterogeneous volatility in…
We study the impact of volatility on intraday serial correlation, at time scales of less than 20 minutes, exploiting a data set with all transaction on SPX500 futures from 1993 to 2001. We show that, while realized volatility and intraday…
Inspired by the recent literature on aggregation theory, we aim at relating the long range correlation of the stocks return volatility to the heterogeneity of the investors' expectations about the level of the future volatility. Based on a…
We investigate quantitatively the so-called leverage effect, which corresponds to a negative correlation between past returns and future volatility. For individual stocks, this correlation is moderate and decays exponentially over 50 days,…
Over the past 60 years, there has been a gradual increase in the volatility of daily returns for the S&P 500 Index. Hypothetically, suppose that market forces determine daily volatility such that a daily leveraged S&P 500 fund cannot…
Financial time series exhibit two different type of non linear correlations: (i) volatility autocorrelations that have a very long range memory, on the order of years, and (ii) asymmetric return-volatility (or `leverage') correlations that…
The leverage effect-- the correlation between an asset's return and its volatility-- has played a key role in forecasting and understanding volatility and risk. While it is a long standing consensus that leverage effects exist and improve…
In financial markets, greater volatility is usually considered synonym of greater risk and instability. However, large market downturns and upturns are often preceded by long periods where price returns exhibit only small fluctuations. To…
We exploit a continuous time random walk description of stock prices to obtain a fast and accurate evaluation of their volatility from intraday data. We show that financial markets are usefully described as open physical systems. Indeed we…
An extensive empirical literature documents a generally negative correlation, named the "leverage effect," between asset returns and changes of volatility. It is more challenging to establish such a return-volatility relationship for jumps…
We point out a stunning time asymmetry in the short time cross correlations between intra-day and overnight volatilities (absolute values of log-returns of stock prices). While overnight volatility is significantly (and positively)…
The gain-loss asymmetry, observed in the inverse statistics of stock indices is present for logarithmic return levels that are over $2\%$, and it is the result of the non-Pearson type auto-correlations in the index. These non-Pearson type…
We revisit the index leverage effect, that can be decomposed into a volatility effect and a correlation effect. We investigate the latter using a matrix regression analysis, that we call `Principal Regression Analysis' (PRA) and for which…
We report evidence of a deep interplay between cross-correlations hierarchical properties and multifractality of New York Stock Exchange daily stock returns. The degree of multifractality displayed by different stocks is found to be…
Using high frequency data, we have studied empirically the change of volatility, also called volatility derivative, for various time horizons. In particular, the correlation between the volatility derivative and the volatility realized in…
This paper proposes a theory of stock market predictability patterns based on a model of heterogeneous beliefs. In a discrete finite time framework, some agents receive news about an asset's fundamental value through a noisy signal. The…
Standard methods and theories in finance can be ill-equipped to capture highly non-linear interactions in financial prediction problems based on large-scale datasets, with deep learning offering a way to gain insights into correlations in…
The leverage effect refers to the generally negative correlation between the return of an asset and the changes in its volatility. There is broad agreement in the literature that the effect should be present for theoretical reasons, and it…
What is the dominating mechanism of the price dynamics in financial systems is of great interest to scientists. The problem whether and how volatilities affect the price movement draws much attention. Although many efforts have been made,…
In financial markets, low prices are generally associated with high volatilities and vice-versa, this well known stylized fact usually being referred to as leverage effect. We propose a local volatility model, given by a stochastic…
In an efficient stock market, the log-returns and their time-dependent variances are often jointly modelled by stochastic volatility models (SVMs). Many SVMs assume that errors in log-return and latent volatility process are uncorrelated,…