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Time-reversal asymmetry in financial systems

  • X. F. Jiang
  • T. T. Chen
  • B. Zheng
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    We investigate the large-fluctuation dynamics in financial markets, based on the minute-to-minute and daily data of the Chinese Indices and German DAX. The dynamic relaxation both before and after the large fluctuations is characterized by a power law, and the exponents $p_\pm$ usually vary with the strength of the large fluctuations. The large-fluctuation dynamics is time-reversal symmetric at the time scale in minutes, while asymmetric at the daily time scale. Careful analysis reveals that the time-reversal asymmetry is mainly induced by external forces. It is also the external forces which drive the financial system to a non-stationary state. Different characteristics of the Chinese and German stock markets are uncovered.

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    File URL: http://arxiv.org/pdf/1308.0669
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    Paper provided by arXiv.org in its series Papers with number 1308.0669.

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    Date of creation: Aug 2013
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    Publication status: Published in Physica A, Volume 392, Issue 21, 1 November 2013, Pages 5369-5375
    Handle: RePEc:arx:papers:1308.0669
    Contact details of provider: Web page: http://arxiv.org/

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    1. Mu, Guo-Hua & Zhou, Wei-Xing, 2008. "Relaxation dynamics of aftershocks after large volatility shocks in the SSEC index," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(21), pages 5211-5218.
    2. Qiu, T. & Zheng, B. & Ren, F. & Trimper, S., 2007. "Statistical properties of German Dax and Chinese indices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 378(2), pages 387-398.
    3. Vrugt, Evert B., 2009. "U.S. and Japanese macroeconomic news and stock market volatility in Asia-Pacific," Pacific-Basin Finance Journal, Elsevier, vol. 17(5), pages 611-627, November.
    4. Tian Qiu & Bo Zheng & Guang Chen, 2010. "Adaptive financial networks with static and dynamic thresholds," Papers 1002.3432, arXiv.org.
    5. D. Sornette, 2003. "Critical Market Crashes," Papers cond-mat/0301543, arXiv.org.
    6. Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 3-40.
    7. Alexander M. Petersen & Fengzhong Wang & Shlomo Havlin & H. Eugene Stanley, 2009. "Quantitative law describing market dynamics before and after interest-rate change," Papers 0903.0010, arXiv.org, revised Oct 2010.
    8. Zhiguang (Gerald) Wang, 2009. "Volatility Risk," Issue Briefs 2009513, South Dakota State University, Department of Economics.
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