Microscopic Models for Long Ranged Volatility Correlations
arXiv:cond-mat/0105076 · doi:10.1016/S0378-4371(01)00280-1
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, 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.
12 pages, 4 figures. Proceedings of the NATO Advanced Research Workshop "Application of Physics to Economic Modelling ", Praga (8-10 February 2001). To be published in Physica A
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