Cross-response in correlated financial markets: individual stocks

Abstract

Previous studies of the stock price response to trades focused on the dynamics of single stocks, i.e. they addressed the self-response. We empirically investigate the price response of one stock to the trades of other stocks in a correlated market, i.e. the cross-responses. How large is the impact of one stock on others and vice versa? -- This impact of trades on the price change across stocks appears to be transient instead of permanent as we discuss from the viewpoint of market efficiency. Furthermore, we compare the self-responses on different scales and the self- and cross-responses on the same scale. We also find that the cross-correlation of the trade signs turns out to be a short-memory process.

arXiv commentstock pairs, unaveraged, see arXiv:1510.03205

References in corpus (7)

• More statistical properties of order books and price impact
• Quantifying Stock Price Response to Demand Fluctuations
• A theory for long-memory in supply and demand
• Why is order flow so persistent?
• Non-Stationarity in Financial Time Series and Generic Features
• Fluctuations and Market Friction in Financial Trading
• Microscopic understanding of heavy-tailed return distributions in an agent-based model

Cited by in corpus (15)

• Impact and Recovery Process of Mini Flash Crashes: An Empirical Study
• Average cross-responses in correlated financial market
• Collective behavior in the North Rhine-Westphalia motorway network
• Microscopic Understanding of Cross-Responses between Stocks: a Two-Component Price Impact Model
• How spread changes affect the order book: Comparing the price responses of order deletions and placements to trades
• Statistical properties of market collective responses
• Response functions as a new concept to study local dynamics in traffic networks
• Foreign exchange markets: price response and spread impact
• Grasping asymmetric information in market impacts
• Local fluctuations of the signed traded volumes and the dependencies of demands: a copula analysis
• Multivariate Distributions in Non-Stationary Complex Systems I: Random Matrix Model and Formulae for Data Analysis
• A New Traders' Game? -- Empirical Analysis of Response Functions in a Historical Perspective
• Dynamic analysis of influential stocks based on conserved networks
• Spatiotemporal statistical features of velocity responses to traffic congestions in a local motorway network
• Multivariate Distributions in Non-Stationary Complex Systems II: Empirical Results for Correlated Stock Markets