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Spurious trend switching phenomena in financial markets

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  • Vladimir Filimonov
  • Didier Sornette
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    Abstract

    The observation of power laws in the time to extrema of volatility, volume and intertrade times, from milliseconds to years, are shown to result straightforwardly from the selection of biased statistical subsets of realizations in otherwise featureless processes such as random walks. The bias stems from the selection of price peaks that imposes a condition on the statistics of price change and of trade volumes that skew their distributions. For the intertrade times, the extrema and power laws results from the format of transaction data.

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    File URL: http://arxiv.org/pdf/1112.3868
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    Bibliographic Info

    Paper provided by arXiv.org in its series Papers with number 1112.3868.

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    Date of creation: Dec 2011
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    Handle: RePEc:arx:papers:1112.3868

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