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Local fluctuations of the signed traded volumes and the dependencies of demands: a copula analysis

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  • Shanshan Wang
  • Thomas Guhr

Abstract

We investigate how the local fluctuations of the signed traded volumes affect the dependence of demands between stocks. We analyze the empirical dependence of demands using copulas and show that they are well described by a bivariate $\mathcal{K}$ copula density function. We find that large local fluctuations strongly increase the positive dependence but lower slightly the negative one in the copula density. This interesting feature is due to cross-correlations of volume imbalances between stocks. Also, we explore the asymmetries of tail dependencies of the copula density, which are moderate for the negative dependencies but strong for the positive ones. For the latter, we reveal that large local fluctuations of the signed traded volumes trigger stronger dependencies of demands than of supplies, probably indicating a bull market with persistent raising of prices.

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  • Shanshan Wang & Thomas Guhr, 2017. "Local fluctuations of the signed traded volumes and the dependencies of demands: a copula analysis," Papers 1706.09240, arXiv.org, revised Apr 2018.
    • Handle: RePEc:arx:papers:1706.09240
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    References listed on IDEAS

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    1. Marc Potters & Jean-Philippe Bouchaud, 2003. "Comment on: "Two-phase behaviour of financial markets"," Science & Finance (CFM) working paper archive 50002, Science & Finance, Capital Fund Management.
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    3. Lim, Gyuchang & Yong Kim, Soo & Kim, Kyungsik & Lee, Dong-In & Park, Sang-Bum, 2007. "Dynamical mechanism of two-phase phenomena in financial markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 386(1), pages 253-258.
    4. Kaushik Matia & Kazuko Yamasaki, 2005. "Statistical Properties of Demand Fluctuation in the Financial Market," Papers physics/0502084, arXiv.org.
    5. Kaushik Matia & Kazuko Yamasaki, 2005. "Statistical properties of demand fluctuation in the financial market," Quantitative Finance, Taylor & Francis Journals, vol. 5(6), pages 513-517.
    6. Vasiliki Plerou & Parameswaran Gopikrishnan & H. Eugene Stanley, 2005. "Two phase behaviour and the distribution of volume," Quantitative Finance, Taylor & Francis Journals, vol. 5(6), pages 519-521.
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    Cited by:

    1. Juan C. Henao-Londono & Sebastian M. Krause & Thomas Guhr, 2021. "Price response functions and spread impact in correlated financial markets," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 94(4), pages 1-20, April.
    2. Henao-Londono, Juan C. & Guhr, Thomas, 2022. "Foreign exchange markets: Price response and spread impact," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 589(C).

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