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We analyze the statistical dependency structure of the S&P 500 constituents in the 4-year period from 2007 to 2010 using intraday data from the New York Stock Exchange's TAQ database. With a copula-based approach, we find that the…
Understanding the mutual relationships between information flows and social activity in society today is one of the cornerstones of the social sciences. In financial economics, the key issue in this regard is understanding and quantifying…
For the pedestrian observer, financial markets look completely random with erratic and uncontrollable behavior. To a large extend, this is correct. At first approximation the difference between real price changes and the random walk model…
Information theory provides ideas for conceptualising information and measuring relationships between objects. It has found wide application in the sciences, but economics and finance have made surprisingly little use of it. We show that…
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…
A spring-block chain placed on a running conveyor belt is considered for modeling stylized facts observed in the dynamics of stock indexes. Individual stocks are modeled by the blocks, while the stock-stock correlations are introduced via…
This paper describes the dependence of market-based statistical moments of returns on statistical moments and correlations of the current and past trade values. We use Markowitz's definition of value weighted return of a portfolio as the…
This paper presents a general framework for modeling dependence in multivariate time series. Its fundamental approach relies on decomposing each signal in a system into various frequency components and then studying the dependence…
The cross-correlation matrix of daily returns of stock market indices in a diverse set of 37 countries worldwide was analyzed. Comparison of the spectrum of this matrix with predictions of random matrix theory provides an empirical evidence…
We study the relation between serial correlation of financial returns and volatility at intraday level for the S&P500 stock index. At daily and weekly level, serial correlation and volatility are known to be negatively correlated (LeBaron…
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…
Long-range correlation in financial time series reflects the complex dynamics of the stock markets driven by algorithms and human decisions. Our analysis exploits ultra-high frequency order book data from NASDAQ Nordic over a period of…
The analysis which assumes that tick by tick data is linear may lead to wrong conclusions if the underlying process is multiplicative. We compare data analysis done with the return and stock differences and we study the limits within the…
We study the various sectors of the Bombay Stock Exchange(BSE) for a period of 8 years from April 2006 - March 2014. Using the data of daily returns of a period of eight years we make a direct model free analysis of the pattern of the…
The market efficiency hypothesis has been proposed to explain the behavior of time series of stock markets. The Black-Scholes model (B-S) for example, is based on the assumption that markets are efficient. As a consequence, it is…
This paper examines quantile dependence between international stock markets and evaluates its use for improving volatility forecasting. First, we analyze quantile dependence and directional predictability between the US stock market and…
In this paper we provide evidence that financial option markets for equity indices give rise to non-trivial dependency structures between its constituents. Thus, if the individual constituent distributions of an equity index are inferred…
In multivariate time series systems, it has been observed that certain groups of variables partially lead the evolution of the system, while other variables follow this evolution with a time delay; the result is a lead-lag structure amongst…
This paper examines asymmetric and time-varying dependency structures between financial returns, using a novel approach consisting of a combination of regime-switching models and the local Gaussian correlation (LGC). We propose an LGC-based…
Contagion arising from clustering of multiple time series like those in the stock market indicators can further complicate the nature of volatility, rendering a parametric test (relying on asymptotic distribution) to suffer from issues on…