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Modelling high-frequency economic time series

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  • Tang, Lei-Han
  • Huang, Zhi-Feng

Abstract

The minute-by-minute move of the Hang Seng index (HSI) data over a 4-yr period is analysed and shown to possess similar statistical features as those of other markets. Based on a mathematical theorem (Pope, Ching, Phys. Fluids A 5 (1993) 1529), we derive an analytic form for the probability distribution function (PDF) of index moves from fitted functional forms of certain conditional averages of the time series. Furthermore, following a recent work by Stolovitzky and Ching (Phys. Lett. A 255 (1999) 11), we show that the observed PDF can be reproduced by a Langevin process with a move-dependent noise amplitude. The form of the Langevin equation can be determined directly from the market data.

Suggested Citation

  • Tang, Lei-Han & Huang, Zhi-Feng, 2000. "Modelling high-frequency economic time series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 288(1), pages 444-450.
    • Handle: RePEc:eee:phsmap:v:288:y:2000:i:1:p:444-450
    DOI: 10.1016/S0378-4371(00)00442-8
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    References listed on IDEAS

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    1. Engle, Robert F. (ed.), 1995. "ARCH: Selected Readings," OUP Catalogue, Oxford University Press, number 9780198774327, Decembrie.
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