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Market-Based Price Autocorrelation

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  • Victor Olkhov

Abstract

This paper assumes that the randomness of market trade values and volumes determines the properties of stochastic market prices. We derive the direct dependence of the first two price statistical moments and price volatility on statistical moments, volatilities, and correlations of market trade values and volumes. That helps describe the dependence of market-based price autocorrelation between times t and t-{\tau} on statistical moments and correlations between trade values and volumes. That highlights the impact of the randomness of the size of market deals on price statistical moments and autocorrelation. Statistical moments and correlations of market trade values and volumes are assessed by conventional frequency-based probabilities. The distinctions between market-based price autocorrelation and autocorrelation that are assessed by the frequency-based probability analysis of price time series reveal the different approaches to the definitions of price probabilities. To forecast market-based price autocorrelation, one should predict the statistical moments and correlations of trade values and volumes.

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  • Victor Olkhov, 2022. "Market-Based Price Autocorrelation," Papers 2202.09323, arXiv.org, revised Feb 2024.
    • Handle: RePEc:arx:papers:2202.09323
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    Cited by:

    1. Olkhov, Victor, 2022. "Price and Payoff Autocorrelations in the Consumption-Based Asset Pricing Model," MPRA Paper 112255, University Library of Munich, Germany.
    2. Victor Olkhov, 2022. "Price and Payoff Autocorrelations in a Multi-Period Consumption-Based Asset Pricing Model," Papers 2204.07506, arXiv.org, revised Mar 2024.

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