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”Direct” causal cascade in the stock market |
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| Authors: | A Arnéodo J-F Muzy D Sornette |
| Institution: | (1) Centre de Recherche Paul Pascal (CNRS UPR 8641), Université de Bordeaux I, avenue Schweitzer, 33600 Pessac, France, FR;(2) Department of Earth and Space Science and Institute of Geophysics and Planetary Physics, University of California, Los Angeles, California 90095, USA, US;(3) Laboratoire de Physique de la Matière Condensée (CNRS URA 190), Université des Sciences, B.P. 70, Parc Valrose, 06108 Nice Cedex 2, France, FR |
| Abstract: | We use wavelets to decompose the volatility (standard deviation) of intraday (S&P500) return data across scales. We show that when investigating two-point correlation functions of the volatility logarithms across different time scales, one reveals the existence of a causal information cascade from large scales (i.e. small frequencies) to fine scales. We quantify and visualize the information flux across scales. We provide a possible interpretation of our findings in terms of market dynamics. Received: 9 January 1998 / Received in final form and accepted: 13 January 1998 |
| Keywords: | PACS 02 50 -r Probability theory stochastic processes and statistics -05 40 +j Fluctuation phenomena random processes and Brownian motion -89 90 +n Other areas of general interest to physicists |
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