dorsal/arxiv
View SchemaDetecting subtle effects of persistence in the stock market dynamics
| Authors | R. Rak, S. Drozdz, J. Kwapien, P. Oswiecimka |
|---|---|
| Categories | |
| ArXiv ID | physics/0504158 |
| URL | https://arxiv.org/abs/physics/0504158 |
| Journal | Acta Phys. Pol. B, 36, (2005), 2459-2468. |
Abstract
The conventional formal tool to detect effects of the financial persistence is in terms of the Hurst exponent. A typical corresponding result is that its value comes out close to 0.5, as characteristic for geometric Brownian motion, with at most small departures from this value in either direction depending on the market and on the time scales involved. We study the high frequency price changes on the American and on the German stock markets. For both corresponding indices, the Dow Jones and the DAX respectively, the Hurst exponent analysis results in values close to 0.5. However, by decomposing the market dynamics into pairs of steps such that an elementary move up (down) is followed by another move up (down) and explicitly counting the resulting conditional probabilities we find values typically close to 60%. This effect of persistence is particularly visible on the short time scales ranging from 1 up to 3 minutes, decreasing gradually to 50% and even significantly below this value on the larger time scales. We also detect some asymmetry in persistence related to the moves up and down, respectively. This indicates a subtle nature of the financial persistence whose characteristics escape detection within the conventional Hurst exponent formalism.
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"abstract": "The conventional formal tool to detect effects of the financial persistence\nis in terms of the Hurst exponent. A typical corresponding result is that its\nvalue comes out close to 0.5, as characteristic for geometric Brownian motion,\nwith at most small departures from this value in either direction depending on\nthe market and on the time scales involved. We study the high frequency price\nchanges on the American and on the German stock markets. For both corresponding\nindices, the Dow Jones and the DAX respectively, the Hurst exponent analysis\nresults in values close to 0.5. However, by decomposing the market dynamics\ninto pairs of steps such that an elementary move up (down) is followed by\nanother move up (down) and explicitly counting the resulting conditional\nprobabilities we find values typically close to 60%. This effect of persistence\nis particularly visible on the short time scales ranging from 1 up to 3\nminutes, decreasing gradually to 50% and even significantly below this value on\nthe larger time scales. We also detect some asymmetry in persistence related to\nthe moves up and down, respectively. This indicates a subtle nature of the\nfinancial persistence whose characteristics escape detection within the\nconventional Hurst exponent formalism.",
"arxiv_id": "physics/0504158",
"authors": [
"R. Rak",
"S. Drozdz",
"J. Kwapien",
"P. Oswiecimka"
],
"categories": [
"physics.soc-ph",
"cond-mat.stat-mech",
"physics.data-an",
"q-fin.ST"
],
"journal_ref": "Acta Phys. Pol. B, 36, (2005), 2459-2468.",
"title": "Detecting subtle effects of persistence in the stock market dynamics",
"url": "https://arxiv.org/abs/physics/0504158"
},
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