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arxiv: cond-mat/0105076 · v1 · submitted 2001-05-03 · ❄️ cond-mat.dis-nn · cond-mat.stat-mech· q-fin.ST

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Microscopic Models for Long Ranged Volatility Correlations

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classification ❄️ cond-mat.dis-nn cond-mat.stat-mechq-fin.ST
keywords modelsinactiveinterpretationmarketvolatilityaccountedactiveactivity
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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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