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We propose a simple non-equilibrium model of a financial market as an open system with a possible exchange of money with an outside world and market frictions (trade impacts) incorporated into asset price dynamics via a feedback mechanism.…
Financial empirical correlation matrices of all the companies which both, the Deutsche Aktienindex (DAX) and the Dow Jones comprised during the time period 1990-1999 are studied using a time window of a limited, either 30 or 60, number of…
Breakjunction experiments allow investigating electronic and spintronic properties at the atomic and molecular scale. These experiments generate by their very nature broad and asymmetric distributions of the observables of interest, and…
The problem of non-stationarity in financial markets is discussed and related to the dynamic nature of price volatility. A new measure is proposed for estimation of the current asset volatility. A simple and illustrative explanation is…
With the random matrix theory, we study the spatial structure of the Chinese stock market, American stock market and global market indices. After taking into account the signs of the components in the eigenvectors of the cross-correlation…
The presence of significant cross-correlations between the synchronous time evolution of a pair of equity returns is a well-known empirical fact. The Pearson correlation is commonly used to indicate the level of similarity in the price…
In this paper, we introduce quantile coherency to measure general dependence structures emerging in the joint distribution in the frequency domain and argue that this type of dependence is natural for economic time series but remains…
We propose a novel family of test statistics to detect the presence of changepoints in a sequence of dependent, possibly multivariate, functional-valued observations. Our approach allows to test for a very general class of changepoints,…
In this paper, we introduce an asymptotic test procedure to assess the stability of volatilities and cross-volatilites of linear and nonlinear multivariate time series models. The test is very flexible as it can be applied, for example, to…
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…
In this paper we develop a novel hidden Markov graphical model to investigate time-varying interconnectedness between different financial markets. To identify conditional correlation structures under varying market conditions and…
This paper continues a series of studies devoted to analysis of the bivariate probability distribution P(x,y) of two consecutive price increments x (push) and y (response) at intraday timescales for a group of stocks. Besides the asymmetry…
We propose a new framework for measuring connectedness among financial variables that arises due to heterogeneous frequency responses to shocks. To estimate connectedness in short-, medium-, and long-term financial cycles, we introduce a…
Testing for change points in sequences of covariance matrices is an important and equally challenging problem in statistical methodology with applications in various fields. Motivated by the observation that even in cases where the ratio…
Most empirical microstructure research assumes that order flow--return parameters are constant, yet these relationships shift substantially across market regimes. Combining adaptive Kalman filtering, Markov-switching regime identification,…
This paper examines the dynamic interaction between falling and rising markets for both the real and the financial sectors of the largest economy in the world using asymmetric causality tests. These tests require that each underlying…
In order to emphasize cross-correlations for fluctuations in major market places, series of up and down spins are built from financial data. Patterns frequencies are measured, and statistical tests performed. Strong cross-correlations are…
In the age of globalization, it is natural that the stock market of each country is not independent form the other markets. In this case, collective behavior could be emerged form their dependency together. This article studies the…
Inspired by decomposition problems in rule-based formalisms in Computational Systems Biology and recent work on compositionality in graph transformation, this paper proposes to use arbitrary colimits to "deconstruct" models of reactions in…
We use a new method of studying the Hurst exponent with time and scale dependency. This new approach allow us to recover the major events affecting worldwide markets (such as the September 11th terrorist attack) and analyze the way those…