Microscopic models for long ranged volatility correlations
We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated to random-walk like processes. We numerically demonstrate our scenario in the framework of simplified market models, such as the Minority Game model with an inactive strategy, or a more sophisticated version that includes some price dynamics. We show that real market data can be surprisingly well accounted for by these simple models.
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|Date of creation:||Jan 2001|
|Date of revision:|
|Publication status:||Published in Physica A 299 (1-2) (2001) pp. 28-39.|
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