Related papers: On the origin of the Epps effect
We review the evidence that the erratic dynamics of markets is to a large extent of endogenous origin, i.e. determined by the trading activity itself and not due to the rational processing of exogenous news. In order to understand why and…
We establish several new stylised facts concerning the intra-day seasonalities of stock dynamics. Beyond the well known U-shaped pattern of the volatility, we find that the average correlation between stocks increases throughout the day,…
Motivated by the literature on investment flows and optimal trading, we examine intraday predictability in the cross-section of stock returns. We find a striking pattern of return continuation at half-hour intervals that are exact multiples…
We argue that an important contributing factor into market inefficiency is the lack of a robust mechanism for the stock price to rise if a company has good earnings, e.g., via buybacks/dividends. Instead, the stock price is prone to…
We demonstrate that minority mechanisms arise in the dynamics of markets because of effects of price impact; accordingly the relative importance of minority and delayed majority mechanisms depends on the frequency of trading. We then use…
In order to understand the origin of stock price jumps, we cross-correlate high-frequency time series of stock returns with different news feeds. We find that neither idiosyncratic news nor market wide news can explain the frequency and…
We test the hypothesis that consecutive intraday price changes in the most liquid U.S. equity ETF (SPY) are conditionally nonrandom. Using NBBO event-time data for about 1,500 regular trading days, we form for every lag L ordered pairs of a…
We propose a novel two-stage framework to detect lead-lag relationships in the Chinese A-share market. First, long-term coupling between stocks is measured via daily data using correlation, dynamic time warping, and rank-based metrics.…
Using symmetric boundary conditions at separated times, I show analytically that both the time ordering of (macroscopic) causality and the direction of entropy increase follow from these boundary conditions. In particular, when the…
An average instantaneous cross-correlation function is introduced to quantify the interaction of the financial market of a specific time. Based on the daily data of the American and Chinese stock markets, memory effect of the average…
Collective behaviours taking place in financial markets reveal strongly correlated states especially during a crisis period. A natural hypothesis is that trend reversals are also driven by mutual influences between the different stock…
We study in details the skew of stock option smiles, which is induced by the so-called leverage effect on the underlying -- i.e. the correlation between past returns and future square returns. This naturally explains the anomalous…
Stock correlations is crucial to asset pricing, investor decision-making, and financial risk regulations. However, microscopic explanation based on agent-based modeling is still lacking. We here propose a model derived from minority game…
To identify emerging interdependencies between traded stocks we investigate the behavior of the stocks of FTSE 100 companies in the period 2000-2015, by looking at daily stock values. Exploiting the power of information theoretical measures…
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…
According to the leading models in modern finance, the presence of intraday lead-lag relationships between financial assets is negligible in efficient markets. With the advance of technology, however, markets have become more sophisticated.…
The minimum spanning tree is used to study the process of market integration for a large group of national stock market indices. We show how the asset tree evolves over time and describe the dynamics of its normalized length, mean…
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…
One of the major issues studied in finance that has always intrigued, both scholars and practitioners, and to which no unified theory has yet been discovered, is the reason why prices move over time. Since there are several well-known…
Detailed study of the financial empirical correlation matrix of the 30 companies comprised by DAX within the period of the last 11 years, using the time-window of 30 trading days, is presented. This allows to clearly identify a nontrivial…