dorsal/arxiv
View SchemaAnalysis of aggregated tick returns: evidence for anomalous diffusion
| Authors | Philipp Weber |
|---|---|
| Categories | |
| ArXiv ID | physics/0606164 |
| URL | https://arxiv.org/abs/physics/0606164 |
| DOI | 10.1103/PhysRevE.75.016105 |
Abstract
In order to investigate the origin of large price fluctuations, we analyze stock price changes of ten frequently traded NASDAQ stocks in the year 2002. Though the influence of the trading frequency on the aggregate return in a certain time interval is important, it cannot alone explain the heavy tailed distribution of stock price changes. For this reason, we analyze intervals with a fixed number of trades in order to eliminate the influence of the trading frequency and investigate the relevance of other factors for the aggregate return. We show that in tick time the price follows a discrete diffusion process with a variable step width while the difference between the number of steps in positive and negative direction in an interval is Gaussian distributed. The step width is given by the return due to a single trade and is long-term correlated in tick time. Hence, its mean value can well characterize an interval of many trades and turns out to be an important determinant for large aggregate returns. We also present a statistical model reproducing the cumulative distribution of aggregate returns. For an accurate agreement with the empirical distribution, we also take into account asymmetries of the step widths in different directions together with crosscorrelations between these asymmetries and the mean step width as well as the signs of the steps.
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"abstract": "In order to investigate the origin of large price fluctuations, we analyze\nstock price changes of ten frequently traded NASDAQ stocks in the year 2002.\nThough the influence of the trading frequency on the aggregate return in a\ncertain time interval is important, it cannot alone explain the heavy tailed\ndistribution of stock price changes. For this reason, we analyze intervals with\na fixed number of trades in order to eliminate the influence of the trading\nfrequency and investigate the relevance of other factors for the aggregate\nreturn. We show that in tick time the price follows a discrete diffusion\nprocess with a variable step width while the difference between the number of\nsteps in positive and negative direction in an interval is Gaussian\ndistributed. The step width is given by the return due to a single trade and is\nlong-term correlated in tick time. Hence, its mean value can well characterize\nan interval of many trades and turns out to be an important determinant for\nlarge aggregate returns. We also present a statistical model reproducing the\ncumulative distribution of aggregate returns. For an accurate agreement with\nthe empirical distribution, we also take into account asymmetries of the step\nwidths in different directions together with crosscorrelations between these\nasymmetries and the mean step width as well as the signs of the steps.",
"arxiv_id": "physics/0606164",
"authors": [
"Philipp Weber"
],
"categories": [
"physics.soc-ph",
"q-fin.ST"
],
"doi": "10.1103/PhysRevE.75.016105",
"title": "Analysis of aggregated tick returns: evidence for anomalous diffusion",
"url": "https://arxiv.org/abs/physics/0606164"
},
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