Activity Autocorrelation in Financial Markets' a Comparative Study between Several Models

European Physical Journal, Vol. 38, pp. 671-677

15 Pages Posted: 20 Jul 2005

See all articles by Luigi Palatella

Luigi Palatella

Universita di Pisa

Josep Perelló

University of Barcelona - Department of Physics

Miquel Montero

University of Barcelona - Departament de Física de la Matèria Condensada

Jaume Masoliver

University of Barcelona - Department of Physics

Abstract

We study the activity, i.e., the number of transactions per unit time, of financial markets. Using the diffusion entropy technique we show that the autocorrelation of the activity is caused by the presence of peaks whose time distances are distributed following an asymptotic power law which ultimately recovers the Poissonian behavior. We discuss these results in comparison with ARCH models, stochastic volatility models and multi-agent models showing that ARCH and stochastic volatility models better describe the observed experimental evidences.

Keywords: Financial markets, time series analysis, market microsture, activity

JEL Classification: C41, G10, C6, C10, D40

Suggested Citation

Palatella, Luigi and Perello, Josep and Montero, Miquel and Masoliver, Jaume, Activity Autocorrelation in Financial Markets' a Comparative Study between Several Models. European Physical Journal, Vol. 38, pp. 671-677. Available at SSRN: https://ssrn.com/abstract=481183

Luigi Palatella

Universita di Pisa ( email )

Lungarno Pacinotti, 43
Pisa PI, 56126
Italy

Josep Perello (Contact Author)

University of Barcelona - Department of Physics ( email )

Diagonal, 647
Barcelona, E-08028
Spain
+34 9 34021150 (Phone)
+34 34021149 (Fax)

Miquel Montero

University of Barcelona - Departament de Física de la Matèria Condensada ( email )

Martí i Franquès, 1
Barcelona, Catalonia 08028
Spain
+34 93 403 92 53 (Phone)
+34 93 402 11 55 (Fax)

Jaume Masoliver

University of Barcelona - Department of Physics ( email )

Barcelona, E-08028
Spain
00 34 3 402 11 59 (Phone)
00 34 3 402 11 49 (Fax)

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