”Direct” causal cascade in the stock market

  • A. Arnéodo
  • J.-F. Muzy
  • D. Sornette
Article

Abstract:

We use wavelets to decompose the volatility (standard deviation) of intraday (S&P500) return data across scales. We show that when investigating two-point correlation functions of the volatility logarithms across different time scales, one reveals the existence of a causal information cascade from large scales (i.e. small frequencies) to fine scales. We quantify and visualize the information flux across scales. We provide a possible interpretation of our findings in terms of market dynamics.

PACS. 02.50.-r Probability theory, stochastic processes, and statistics -05.40.+j Fluctuation phenomena, random processes, and Brownian motion -89.90.+n  Other areas of general interest to physicists 

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Copyright information

© EDP Sciences, Springer-Verlag 1998

Authors and Affiliations

  • A. Arnéodo
    • 1
  • J.-F. Muzy
    • 1
  • D. Sornette
    • 2
  1. 1.Centre de Recherche Paul Pascal (CNRS UPR 8641)Université de Bordeaux Iavenue SchweitzerFrance
  2. 2.Department of Earth and Space Science and Institute of Geophysics and Planetary PhysicsUniversity of CaliforniaLos AngelesUSA

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