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Stochastic resonance and the trade arrival rate of stocks

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Author Info
A. Christian Silva
Ju-Yi J. Yen
Abstract

We studied non-dynamical stochastic resonance for the number of trades in the stock market. The trade arrival rate presents a deterministic pattern that can be modeled by a cosine function perturbed by noise. Due to the nonlinear relationship between the rate and the observed number of trades, the noise can either enhance or suppress the detection of the deterministic pattern. By finding the parameters of our model with intra-day data, we describe the trading environment and illustrate the presence of SR in the trade arrival rate of stocks in the U.S. market.

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File URL: http://arxiv.org/abs/0807.0925
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File URL: http://arxiv.org/pdf/0807.0925
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Paper provided by arXiv.org in its series Quantitative Finance Papers with number 0807.0925.

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Date of creation: Jul 2008
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Handle: RePEc:arx:papers:0807.0925

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  1. Gerety, Mason S & Mulherin, J Harold, 1992. " Trading Halts and Market Activity: An Analysis of Volume at the Open and the Close," Journal of Finance, American Finance Association, vol. 47(5), pages 1765-84, December. [Downloadable!] (restricted)
  2. Thierry Ané & Hélyette Geman, 2000. "Order Flow, Transaction Clock, and Normality of Asset Returns," Journal of Finance, American Finance Association, vol. 55(5), pages 2259-2284, October. [Downloadable!] (restricted)
  3. Clark, Peter K, 1973. "A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices," Econometrica, Econometric Society, vol. 41(1), pages 135-55, January. [Downloadable!] (restricted)
  4. Cyree, Ken B & Winters, Drew B, 2001. "An Intraday Examination of the Federal Funds Market: Implications for the Theories of the Reverse-J Pattern," Journal of Business, University of Chicago Press, vol. 74(4), pages 535-56, October. [Downloadable!] (restricted)
  5. Block, Stanley B. & French, Dan W. & Maberly, Edwin D., 2000. "The Pattern of Intraday Portfolio Management Decisions: A Case Study of Intraday Security Return Patterns," Journal of Business Research, Elsevier, vol. 50(3), pages 321-326, December. [Downloadable!] (restricted)
  6. Aki-Hiro Sato, 2005. "Characteristic time scales of tick quotes on foreign currency markets: an empirical study and agent-based model," Quantitative Finance Papers physics/0512163, arXiv.org, revised Jun 2006. [Downloadable!]
  7. Lockwood, Larry J & Linn, Scott C, 1990. " An Examination of Stock Market Return Volatility during Overnight and Intraday Periods, 1964-1989," Journal of Finance, American Finance Association, vol. 45(2), pages 591-601, June. [Downloadable!] (restricted)
  8. Harrison Hong & Jiang Wang, 2000. "Trading and Returns under Periodic Market Closures," Journal of Finance, American Finance Association, vol. 55(1), pages 297-354, 02. [Downloadable!] (restricted)
  9. Heston, Steven L. & Sadka, Ronnie, 2008. "Seasonality in the cross-section of stock returns," Journal of Financial Economics, Elsevier, vol. 87(2), pages 418-445, February. [Downloadable!] (restricted)
  10. Yi-Tsung Lee & Robert C.W. Fok & Yu-Jane Liu, 2001. "Explaining Intraday Pattern of Trading Volume from the Order Flow Data," Journal of Business Finance & Accounting, Blackwell Publishing, vol. 28(1-2), pages 199-230. [Downloadable!] (restricted)
  11. Brown, Philip & Thomson, Nathanial & Walsh, David, 1999. "Characteristics of the order flow through an electronic open limit order book," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 9(4), pages 335-357, November. [Downloadable!] (restricted)
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