Price fluctuations and market activity
Gopikrishnan, P, Plerou, V, Gabaix, X, Amaral, LAN, Stanley, HEPhysica A 299, 137 - 143 (2001)
Times cited: 19
Abstract
We empirically quantify the relation between trading activity-measured by the number of transactions N-and the price change G (t) for a given stock, over a time interval [t, t + Deltat]. We relate the time-dependent standard deviation of price changes-volatility-to two microscopic quantities: the number of transactions N (t) in Deltat and the variance W-2(t) of the price changes for all transactions in Deltat. We find that the long-ranged volatility correlations are largely due to those of N. We then argue that the tail-exponent of the distribution of N is insufficient to account for the tail-exponent of P{G > x}. Since N and W display only weak inter-dependency, our results show that the fat tails of the distribution P{G > x} arises from U; which has a distribution with power-law tail exponent consistent with our estimates for G. © 2001 Elsevier Science B.V. All rights reserved.