Microscopic models for long ranged volatility correlations
AbstractWe propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated to random-walk like processes. We numerically demonstrate our scenario in the framework of simplified market models, such as the Minority Game model with an inactive strategy, or a more sophisticated version that includes some price dynamics. We show that real market data can be surprisingly well accounted for by these simple models.
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Bibliographic InfoPaper provided by Science & Finance, Capital Fund Management in its series Science & Finance (CFM) working paper archive with number 500024.
Date of creation: Jan 2001
Date of revision:
Publication status: Published in Physica A 299 (1-2) (2001) pp. 28-39.
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-02-13 (All new papers)
- NEP-ETS-2005-03-06 (Econometric Time Series)
- NEP-FIN-2005-02-13 (Finance)
- NEP-FMK-2005-05-04 (Financial Markets)
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