On a Universal Mechanism for Long Ranged Volatility Correlations
14 Pages Posted: 11 Jan 2001
Date Written: December 9, 2000
Abstract
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 rather well accounted for by these simple models.
JEL Classification: C32, C71, D84
Suggested Citation: Suggested Citation
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