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Price fluctuations and market activity

Author

Listed:
  • Gopikrishnan, P.
  • Plerou, V.
  • Gabaix, X.
  • Amaral, L.A.N.
  • Stanley, H.E.

Abstract

We empirically quantify the relation between trading activity—measured by the number of transactions N—and the price change G(t) for a given stock, over a time interval [t,t+Δt]. We relate the time-dependent standard deviation of price changes—volatility—to two microscopic quantities: the number of transactions N(t) in Δt and the variance W2(t) of the price changes for all transactions in Δt. We find that the long-ranged volatility correlations are largely due to those of N. We then argue that the tail-exponent of the distribution of N is insufficient to account for the tail-exponent of P{G>x}. Since N and W display only weak inter-dependency, our results show that the fat tails of the distribution P{G>x} arises from W, which has a distribution with power-law tail exponent consistent with our estimates for G.

Suggested Citation

  • Gopikrishnan, P. & Plerou, V. & Gabaix, X. & Amaral, L.A.N. & Stanley, H.E., 2001. "Price fluctuations and market activity," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 299(1), pages 137-143.
    • Handle: RePEc:eee:phsmap:v:299:y:2001:i:1:p:137-143
    DOI: 10.1016/S0378-4371(01)00288-6
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    References listed on IDEAS

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