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Quantifying the behavior of price dynamics at opening time in stock market

Author

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  • Ochiai, Tomoshiro
  • Takada, Hideyuki
  • Nacher, Jose C.

Abstract

The availability of huge volume of financial data has offered the possibility for understanding the markets as a complex system characterized by several stylized facts. Here we first show that the time evolution of the Japan’s Nikkei stock average index (Nikkei 225) futures follows the resistance and breaking-acceleration effects when the complete time series data is analyzed. However, in stock markets there are periods where no regular trades occur between the close of the market on one day and the next day’s open. To examine these time gaps we decompose the time series data into opening time and intermediate time. Our analysis indicates that for the intermediate time, both the resistance and the breaking-acceleration effects are still observed. However, for the opening time there are almost no resistance and breaking-acceleration effects, and volatility is always constantly high. These findings highlight unique dynamic differences between stock markets and forex market and suggest that current risk management strategies may need to be revised to address the absence of these dynamic effects at the opening time.

Suggested Citation

  • Ochiai, Tomoshiro & Takada, Hideyuki & Nacher, Jose C., 2014. "Quantifying the behavior of price dynamics at opening time in stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 413(C), pages 534-543.
    • Handle: RePEc:eee:phsmap:v:413:y:2014:i:c:p:534-543
    DOI: 10.1016/j.physa.2014.07.011
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