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
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
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