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Anomalous waiting times in high-frequency financial data

Author

Listed:
  • Enrico Scalas
  • Rudolf Gorenflo
  • Hugh Luckock
  • Francesco Mainardi
  • Maurizio Mantelli
  • Marco Raberto

Abstract

In high-frequency financial data not only returns, but also waiting times between consecutive trades are random variables. Therefore, it is possible to apply continuous-time random walks (CTRWs) as phenomenological models of the high-frequency price dynamics. An empirical analysis performed on the 30 DJIA stocks shows that the waiting-time survival probability for high-frequency data is non-exponential. This fact imposes constraints on agent-based models of financial markets.

Suggested Citation

  • Enrico Scalas & Rudolf Gorenflo & Hugh Luckock & Francesco Mainardi & Maurizio Mantelli & Marco Raberto, 2005. "Anomalous waiting times in high-frequency financial data," Papers physics/0505210, arXiv.org.
    • Handle: RePEc:arx:papers:physics/0505210
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    Cited by:

    1. Du, Bian & Zhu, Hongliang & Zhao, Jingdong, 2016. "Optimal execution in high-frequency trading with Bayesian learning," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 461(C), pages 767-777.
    2. Ren, Fei & Guo, Liang & Zhou, Wei-Xing, 2009. "Statistical properties of volatility return intervals of Chinese stocks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(6), pages 881-890.
    3. Takero Ibuki & Jun-ichi Inoue, 2011. "Response of double-auction markets to instantaneous Selling–Buying signals with stochastic Bid–Ask spread," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 6(2), pages 93-120, November.
    4. James Primbs & Muruhan Rathinam, 2009. "Trader Behavior and its Effect on Asset Price Dynamics," Applied Mathematical Finance, Taylor & Francis Journals, vol. 16(2), pages 151-181.
    5. Scalas, Enrico, 2007. "Mixtures of compound Poisson processes as models of tick-by-tick financial data," Chaos, Solitons & Fractals, Elsevier, vol. 34(1), pages 33-40.
    6. Álvaro Cartea, 2013. "Derivatives pricing with marked point processes using tick-by-tick data," Quantitative Finance, Taylor & Francis Journals, vol. 13(1), pages 111-123, January.
    7. Scalas, Enrico & Kaizoji, Taisei & Kirchler, Michael & Huber, Jürgen & Tedeschi, Alessandra, 2006. "Waiting times between orders and trades in double-auction markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 366(C), pages 463-471.
    8. Niu, Hongli & Wang, Jun & Lu, Yunfan, 2016. "Fluctuation behaviors of financial return volatility duration," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 448(C), pages 30-40.
    9. Ni, Xiao-Hui & Jiang, Zhi-Qiang & Gu, Gao-Feng & Ren, Fei & Chen, Wei & Zhou, Wei-Xing, 2010. "Scaling and memory in the non-Poisson process of limit order cancelation," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(14), pages 2751-2761.
    10. Bertram, William K., 2008. "Measuring time dependent volatility and cross-sectional correlation in Australian equity returns," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(13), pages 3183-3191.
    11. Enrico Scalas, 2006. "Five Years of Continuous-time Random Walks in Econophysics," Lecture Notes in Economics and Mathematical Systems, in: Akira Namatame & Taisei Kaizouji & Yuuji Aruka (ed.), The Complex Networks of Economic Interactions, pages 3-16, Springer.
    12. Jiang, Zhi-Qiang & Chen, Wei & Zhou, Wei-Xing, 2008. "Scaling in the distribution of intertrade durations of Chinese stocks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(23), pages 5818-5825.
    13. Ponta, Linda & Trinh, Mailan & Raberto, Marco & Scalas, Enrico & Cincotti, Silvano, 2019. "Modeling non-stationarities in high-frequency financial time series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 521(C), pages 173-196.
    14. Scalas, Enrico, 2006. "The application of continuous-time random walks in finance and economics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 362(2), pages 225-239.
    15. Ruan, Yong-Ping & Zhou, Wei-Xing, 2011. "Long-term correlations and multifractal nature in the intertrade durations of a liquid Chinese stock and its warrant," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(9), pages 1646-1654.
    16. Politi, Mauro & Scalas, Enrico, 2007. "Activity spectrum from waiting-time distribution," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 383(1), pages 43-48.
    17. Vasily E. Tarasov, 2019. "On History of Mathematical Economics: Application of Fractional Calculus," Mathematics, MDPI, vol. 7(6), pages 1-28, June.
    18. Tarasov, Vasily E., 2020. "Fractional econophysics: Market price dynamics with memory effects," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 557(C).
    19. Magdalena Osinska & Andrzej Dobrzynski & Yochanan Shachmurove, 2016. "Performance Of American And Russian Joint Stock Companies On Financial Market. A Microstructure Perspective," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 11(4), pages 819-851, December.
    20. Ren, Fei & Gu, Gao-Feng & Zhou, Wei-Xing, 2009. "Scaling and memory in the return intervals of realized volatility," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(22), pages 4787-4796.
    21. Jiang, Zhi-Qiang & Chen, Wei & Zhou, Wei-Xing, 2009. "Detrended fluctuation analysis of intertrade durations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(4), pages 433-440.
    22. Langlands, T.A.M., 2006. "Solution of a modified fractional diffusion equation," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 367(C), pages 136-144.
    23. Kaizoji, Taisei & Kaizoji, Michiyo, 2004. "Power law for the calm-time interval of price changes," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 336(3), pages 563-570.
    24. Rafał Weron & Ingve Simonsen, 2006. "Blackouts, risk, and fat-tailed distributions," Springer Books, in: Hideki Takayasu (ed.), Practical Fruits of Econophysics, pages 215-219, Springer.

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