https://doi.org/10.1007/s100510050250
“Direct” causal cascade in the stock market
1
Centre de Recherche Paul Pascal (CNRS UPR 8641) ,
Université de Bordeaux I, avenue Schweitzer, 33600 Pessac,
France
2
Department of Earth and Space Science and Institute of Geophysics
and Planetary Physics, University of California, Los Angeles,
California 90095, USA
3
Laboratoire de
Physique de la Matière Condensée (CNRS URA 190) , Université des
Sciences, B.P. 70, Parc Valrose, 06108 Nice Cedex 2, France
Corresponding author: a sornette@naxos.unice.fr
Received:
9
January
1998
Accepted:
13
January
1998
Published online: 15 March 1998
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
© EDP Sciences, Società Italiana di Fisica, Springer-Verlag, 1998
