Statistical properties of trading volume of Chinese stocks

The cumulative distribution of trading volume is investigated for Chinese stocks. Different from the power-law scaling of mature markets, the distribution is well fitted by a stretched exponential function . With the autocorrelation function and the detrended fluctuation analysis, the long-range autocorrelation of trading volume is revealed. The conditional dependence of volume on volatility and the volume-volatility cross-correlation are studied, and a positive long-range correlation between volume and volatility is observed.     

Price–volume cross-correlation analysis of CSI300 index futures

We investigate the cross-correlation between price returns and trading volumes for the China Securities Index 300 (CSI300) index futures, which are the only stock index futures traded on the China Financial Futures Exchange (CFFEX). The basic statistics suggest that distributions of these two time series are not normal but exhibit fat tails. Based on the detrended cross-correlation analysis (DCCA), we obtain that returns and trading volumes are long-range cross-correlated. The existence of multifractality in the cross-correlation between returns and trading volumes has been proven with the multifractal detrended cross-correlation analysis (MFDCCA) algorithm. The multifractal analysis also confirms that returns and trading volumes have different degrees of multifractality. We further perform a cross-correlation statistic to verify whether the cross-correlation significantly exists between returns and trading volumes for CSI300 index futures. In addition, results of the test for lead-lag effect demonstrate that contemporaneous cross-correlation of return and trading volume series is stronger than cross-correlations of leaded or lagged series.     

Grafting of higher-order correlations of real financial markets into herding models

In this work, we graft the volatility clustering observed in empirical financial time series into the Equiluz and Zimmermann (EZ) model, which was introduced to reproduce the herding behaviors of a financial time series. The original EZ model failed to reproduce the empirically observed power-law exponents of real financial data. The EZ model ordinarily produces a more fat-tailed distribution compared to real data, and a long-range correlation of absolute returns that underlie the volatility clustering. As it is not appropriate to capture the empirically observed correlations in a modified EZ model, we apply a sorting method to incorporate the nonlinear correlation structure of a real financial time series into the generated returns. By doing so, we observe that the slow convergence of distribution of returns is well established for returns generated from the EZ model and its modified version. It is also found that the modified EZ model leads to a less fat-tailed distribution.     

The effects of behavioral and structural assumptions in artificial stock market

Recent literature has developed the conjecture that important statistical features of stock price series, such as the fat tails phenomenon, may depend mainly on the market microstructure. This conjecture motivated us to investigate the roles of both the market microstructure and agent behavior with respect to high-frequency returns and daily returns. We developed two simple models to investigate this issue. The first one is a stochastic model with a clearing house microstructure and a population of zero-intelligence agents. The second one has more behavioral assumptions based on Minority Game and also has a clearing house microstructure. With the first model we found that a characteristic of the clearing house microstructure, namely the clearing frequency, can explain fat tail, excess volatility and autocorrelation phenomena of high-frequency returns. However, this feature does not cause the same phenomena in daily returns. So the Stylized Facts of daily returns depend mainly on the agents’ behavior. With the second model we investigated the effects of behavioral assumptions on daily returns. Our study implicates that the aspects which are responsible for generating the stylized facts of high-frequency returns and daily returns are different.     

Power law and multiscaling properties of the Chinese stock market

We investigate the cumulative probability density function (PDF) and the multiscaling properties of the returns in the Chinese stock market. By using returns data adjusted for thin trading, we find that the distribution has power-law tails at shorter microscopic timescales or lags. However, the distribution follows an exponential law for longer timescales. Furthermore, we investigate the long-range correlation and multifractality of the returns in the Chinese stock market by the DFA and MFDFA methods. We find that all the scaling exponents are between 0.5 and 1 by DFA method, which exhibits the long-range power-law correlations in the Chinese stock market. Moreover, we find, by MFDFA method, that the generalized Hurst exponents h(q) are not constants, which shows the multifractality in the Chinese stock market. We also find that the correlation of Shenzhen stock market is stronger than that of Shanghai stock market.     

A brief description to different multi-fractal behaviors of daily wind speed records over China

Scaling behaviors of the long daily wind speed records of four selected weather stations over China were analyzed by using Multi-Fractal Detrended Fluctuation Analysis (MF-DFA). The results indicated that all these four stations are characterized by long-range power-law correlations, but MF-DFA results showed non-universal multi-fractal behaviors over China. We fitted generalized Hurst exponent h(q) via a modified generalized binomial multiplicative cascade model, and different widths of the multi-fractal spectrum are estimated.     

Are all highly liquid securities within the same class?

In this article we analyse the leading statistical properties of fluctuations of (log) 3-month US Treasury bill quotation in the secondary market, namely: probability density function, autocorrelation, absolute values autocorrelation, and absolute values persistency. We verify that this financial instrument, in spite of its high liquidity, shows very peculiar properties. Particularly, we verify that log-fluctuations belong to the Lévy class of stochastic variables.     

Quantifying cross-correlations using local and global detrending approaches

In order to quantify the long-range cross-correlations between two time series qualitatively, we introduce a new cross-correlations test Q_CC(m), where m is the number of degrees of freedom. If there are no cross-correlations between two time series, the cross-correlation test agrees well with the χ²(m) distribution. If the cross-correlations test exceeds the critical value of the χ²(m) distribution, then we say that the cross-correlations are significant. We show that if a Fourier phase-randomization procedure is carried out on a power-law cross-correlated time series, the cross-correlations test is substantially reduced compared to the case before Fourier phase randomization. We also study the effect of periodic trends on systems with power-law cross-correlations. We find that periodic trends can severely affect the quantitative analysis of long-range correlations, leading to crossovers and other spurious deviations from power laws, implying both local and global detrending approaches should be applied to properly uncover long-range power-law auto-correlations and cross-correlations in the random part of the underlying stochastic process.     

Stock price fluctuations and the mimetic behaviors of traders

We give a stochastic microscopic modelling of stock markets driven by continuous double auction. If we take into account the mimetic behavior of traders, when they place limit order, our virtual market shows the power-law tail of the distribution of returns with the exponent outside the Levy stable region, the short memory of returns and the long memory of volatilities. The Hurst exponent of our model is asymptotically . An explanation is also given for the profile of the autocorrelation function, which is responsible for the value of the Hurst exponent.     

Long term memory in extreme returns of financial time series

It is well known that while daily price returns of financial markets are uncorrelated, their absolute values (‘volatility’) are long-term correlated. Here we provide evidence that certain subsequences of the returns themselves also exhibit long-term memory. These subsequences consist of maxima (or minima) of returns in consecutive time windows of R days. Our analysis shows that for both stocks and currency exchange rates, long-term correlations are significant for R≥4. We argue that this long-term memory which is similar to that observed in volatility clustering sheds further insight on price dynamics that might be used for risk estimation.     

Localization-delocalization transition in chains with long-range correlated disorder

We investigated numerically localization properties of electron eigenstates in a chain with long-range correlated diagonal disorder. A tight-binding one-dimensional model with on-site energies exhibiting long-range correlated disorder (LCD) was used with various disorder strength W. LCD was defined so that it gave a power-law spectral density of the form S(k)αk^-p, where p determines the roughness of the potential landscape. Numerical results on the correlation length ξ of eigenstates shows the existence of the localization-delocalization transition at p=2. It is found that the critical values for disorder strength W_c and also the critical exponent ν for localization length change with the values of p.     

Multifractal Fourier detrended cross-correlation analysis of traffic signals

Multifractal detrended cross-correlation analysis (MF-DXA) has been developed to detect the long-range power-law cross-correlation of considered signals in the presence of non-stationarity. However, crossovers arising from extrinsic periodic trends make the scaling behavior difficult to analyze. We introduce a Fourier filtering method to eliminate the trend effects and systematically investigate the multifractal cross-correlation of simulated and real traffic signals. The crossover locations are found approximately corresponding to the periods of underlying trend. Traffic velocity on one road and flows on adjacent roads show strong cross-correlation. They also present weak multifractality after periodic trends are removed. The traffic velocity and flow are cross-correlated in opposite directions which is accordant to their actual evolution.     

On the probability distribution of stock returns in the Mike-Farmer model

Recently, Mike and Farmer have constructed a very powerful and realistic behavioral model to mimick the dynamic process of stock price formation based on the empirical regularities of order placement and cancelation in a purely order-driven market, which can successfully reproduce the whole distribution of returns, not only the well-known power-law tails, together with several other important stylized facts. There are three key ingredients in the Mike-Farmer (MF) model: the long memory of order signs characterized by the Hurst index H_s, the distribution of relative order prices x in reference to the same best price described by a Student distribution (or Tsallis’ q-Gaussian), and the dynamics of order cancelation. They showed that different values of the Hurst index H_s and the freedom degree α_x of the Student distribution can always produce power-law tails in the return distribution f_r(r) with different tail exponent α_r. In this paper, we study the origin of the power-law tails of the return distribution f_r(r) in the MF model, based on extensive simulations with different combinations of the left part L(x) for x < 0 and the right part R(x) for x > 0 of f_x(x). We find that power-law tails appear only when L(x) has a power-law tail, no matter R(x) has a power-law tail or not. In addition, we find that the distributions of returns in the MF model at different timescales can be well modeled by the Student distributions, whose tail exponents are close to the well-known cubic law and increase with the timescale.     

The non-random walk of stock prices: the long-term correlation between signs and sizes

We investigate the random walk of prices by developing a simple model relating the properties of the signs and absolute values of individual price changes to the diffusion rate (volatility) of prices at longer time scales. We show that this benchmark model is unable to reproduce the diffusion properties of real prices. Specifically, we find that for one hour intervals this model consistently over-predicts the volatility of real price series by about 70%, and that this effect becomes stronger as the length of the intervals increases. By selectively shuffling some components of the data while preserving others we are able to show that this discrepancy is caused by a subtle but long-range non-contemporaneous correlation between the signs and sizes of individual returns. We conjecture that this is related to the long-memory of transaction signs and the need to enforce market efficiency.     

Transport between multiple users in complex networks

We study the transport properties of model networks such as scale-free and Erd?s-Rényi networks as well as a real network. We consider few possibilities for the trnasport problem. We start by studying the conductance G between two arbitrarily chosen nodes where each link has the same unit resistance. Our theoretical analysis for scale-free networks predicts a broad range of values of G, with a power-law tail distribution $\Phi_{\rm SF}(G)\sim G^{-g_G}$ , where g_G=2λ-1, and λ is the decay exponent for the scale-free network degree distribution. The power-law tail in Φ_SF(G) leads to large values of G, thereby significantly improving the transport in scale-free networks, compared to Erd?s-Rényi networks where the tail of the conductivity distribution decays exponentially. We develop a simple physical picture of the transport to account for the results. The other model for transport is the max-flow model, where conductance is defined as the number of link-independent paths between the two nodes, and find that a similar picture holds. The effects of distance on the value of conductance are considered for both models, and some differences emerge. We then extend our study to the case of multiple sources ans sinks, where the transport is defined between two groups of nodes. We find a fundamental difference between the two forms of flow when considering the quality of the transport with respect to the number of sources, and find an optimal number of sources, or users, for the max-flow case. A qualitative (and partially quantitative) explanation is also given.     

Short-time dynamics in the 1D long-range Potts model

We present numerical investigations of the short-time dynamics at criticality in the 1D Potts model with power-law decaying interactions of the form 1/r^1+σ. The scaling properties of the magnetization, autocorrelation function and time correlations of the magnetization are studied. The dynamical critical exponents θ' and z are derived in the cases q=2 and q=3 for several values of the parameter σ belonging to the nontrivial critical regime.     

Difference in nature of correlation between NASDAQ and BSE indices

We apply a recently developed wavelet based approach to characterize the correlation and scaling properties of non-stationary financial time series. This approach is local in nature and it makes use of wavelets from the Daubechies family for detrending purpose. The built-in variable windows in wavelet transform makes this procedure well suited for the non-stationary data. We analyze daily price of NASDAQ composite index for a period of 20 years, and BSE sensex index, over a period of 15 years. It is found that the long-range correlation, as well as fractal behavior for both the stock index values differ from each other significantly. Strong non-statistical long-range correlation is observed in BSE index, whose removal revealed a Gaussian random noise character for the corresponding fluctuation. The NASDAQ index, on the other hand, showed a multifractal behavior with long-range statistical correlation.     

Increasing market efficiency: Evolution of cross-correlations of stock returns

We analyse the temporal changes in the cross-correlations of returns on the New York Stock Exchange. We show that lead–lag relationships between daily returns of stocks vanished in less than 20 years. We have found that even for high-frequency data the asymmetry of time-dependent cross-correlation functions has a decreasing tendency, the position of their peaks is shifted towards the origin while these peaks become sharper and higher, resulting in a diminution of the Epps effect. All these findings indicate that the market becomes increasingly efficient.     

Interacting gaps model,dynamics of order book,and stock-market fluctuations

Inspired by order-book models of financial fluctuations, we investigate the Interacting gaps model, which is the schematic one-dimensional system mimicking the order-book dynamics. We find by simulations the power-law tail in return distribution, power-law decay of volatility autocorrelation with exponent 0.5 and Hurst exponent close to 1/2. Surprisingly, when we make a mean-field approximation, i.e. replace the one-dimensional system by effectively infinite-dimensional one, we obtain analytically the return exponent 5/2, in perfect accord with one-dimensional simulations.