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An Application of the SRA Copulas Approach to Price-Volume Research

Author

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  • Pedro Antonio Martín Cervantes

    (Department of Economics and Business, University of Almería, La Cañada de San Urbano, 04120 Almería, Spain
    These authors contributed equally to this work.)

  • Salvador Cruz Rambaud

    (Department of Economics and Business, University of Almería, La Cañada de San Urbano, 04120 Almería, Spain
    These authors contributed equally to this work.)

  • María del Carmen Valls Martínez

    (Department of Economics and Business, University of Almería, La Cañada de San Urbano, 04120 Almería, Spain
    These authors contributed equally to this work.)

Abstract

The objective of this study was to apply the Sadegh, Ragno, and AghaKouchak (SRA) approach to the field of quantitative finance by analyzing, for the first time, the relationship between price and trading volume of the securities using four stock market indices: DJIA, FOOTSIE100, NIKKEI225, and IBEX35. This procedure is a completely new methodology in finance that consists of the application of a Bayesian framework and the development of a hybrid evolution algorithm of the Markov Chain Monte Carlo (MCMC) method to analyze a large number (26) of parametric copulas. With respect to the DJIA, the Joe’s copula is the one that most efficiently models its succinct dependence structures. One of the copulas included in the SRA approach, the Tawn’s copula, is jointly adjusted to the FOOTSIE100, NIKKEI225, and IBEX 35 indices to analyze the asymmetric relationship between price and trading volume. This adjustment can be considered almost perfect for the NIKKEI225, and a relatively different characterization for the IBEX35 seems to indicate the existence of endogenous patterns in the price and volume.

Suggested Citation

  • Pedro Antonio Martín Cervantes & Salvador Cruz Rambaud & María del Carmen Valls Martínez, 2020. "An Application of the SRA Copulas Approach to Price-Volume Research," Mathematics, MDPI, vol. 8(11), pages 1-28, October.
    • Handle: RePEc:gam:jmathe:v:8:y:2020:i:11:p:1864-:d:434824
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    References listed on IDEAS

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