On a universal mechanism for long-range volatility correlations
Authors:
J-P. Bouchaud a;
I. Giardina b;
M. Mzard c
| Affiliations: | a Service de Physique de l' tat Condens , Centre d' tudes de Saclay, Orme des Merisiers, 91191 Gif-sur-Yvette Cedex, France. |
b Service de Physique Th orique, Centre d' tudes de Saclay, Orme des Merisiers, 91191 Gif-sur-Yvette Cedex, France. |
|
c Laboratoire de Physique Th orique et Mod les Statistiques, Universit Paris Sud, Bat. 100, 91405 Orsay Cedex, France. |
DOI:
10.1088/1469-7688/1/2/302
Publication Frequency:
8 issues per year
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Abstract
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. We show that real market data can be surprisingly well accounted for by these simple models.
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