Average Cross-Responses in Correlated Financial Market

The European Physical Journal, 2016, 89:207, doi./10.1140/epjb/e2016-70137-0

13 Pages Posted: 5 Jan 2017

See all articles by Shanshan Wang

Shanshan Wang

Faculty of Physics, University of Duisburg-Essen

Rudi Schäfer

University of Duisburg-Essen

Thomas Guhr

University of Duisburg-Essen

Date Written: September 23, 2016

Abstract

There are non-vanishing price responses across different stocks in correlated financial markets. We further study this issue by performing different averages, which identify active and passive cross-responses. The two average cross-responses show different characteristic dependences on the time lag. The passive cross-response exhibits a shorter response period with sizeable volatilities, while the corresponding period for the active cross-response is longer. The average cross-responses for a given stock are evaluated either with respect to the whole market or to different sectors. Using the response strength, the influences of individual stocks are identified and discussed. Moreover, the various cross-responses as well as the average cross-responses are compared with the self-responses. In contrast, the short memory of trade sign cross-correlation for stock pairs, the sign cross-correlation has long memory when averaged over different pairs of stocks.

Keywords: cross-impact, market microstructure, statistical analysis, complex systems, econophysics

JEL Classification: G12, C81, G14

Suggested Citation

Wang, Shanshan and Schäfer, Rudi and Guhr, Thomas, Average Cross-Responses in Correlated Financial Market (September 23, 2016). The European Physical Journal, 2016, 89:207, doi./10.1140/epjb/e2016-70137-0. Available at SSRN: https://ssrn.com/abstract=2892265

Shanshan Wang (Contact Author)

Faculty of Physics, University of Duisburg-Essen ( email )

Lotharstrasse 1
Duisburg, 47048
Germany

Rudi Schäfer

University of Duisburg-Essen ( email )

Lotharstrasse 1
Duisburg, 47048
Germany

Thomas Guhr

University of Duisburg-Essen ( email )

Lotharstrasse 1
Duisburg, 47048
Germany

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