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From turbulence to financial time series

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  • Holdom, B

Abstract

We develop a framework especially suited to the autocorrelation properties observed in financial times series, by borrowing from the physical picture of turbulence. The success of our approach as applied to high frequency foreign exchange data is demonstrated by the overlap of the curves in a figure (Fig. 1), since we are able to provide an analytical derivation of the relative sizes of the quantities depicted. These quantities include departures from Gaussian probability density functions and various two- and three-point autocorrelation functions.

Suggested Citation

  • Holdom, B, 1998. "From turbulence to financial time series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 254(3), pages 569-576.
    • Handle: RePEc:eee:phsmap:v:254:y:1998:i:3:p:569-576
    DOI: 10.1016/S0378-4371(98)00078-8
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    References listed on IDEAS

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    1. Yanhui Liu & Pierre Cizeau & Martin Meyer & Chung-Kang Peng & H. Eugene Stanley, 1997. "Correlations in Economic Time Series," Papers cond-mat/9706021, arXiv.org.
    2. Rama Cont & Marc Potters & Jean-Philippe Bouchaud, 1997. "Scaling in stock market data: stable laws and beyond," Science & Finance (CFM) working paper archive 9705087, Science & Finance, Capital Fund Management.
    3. Clark, Peter K, 1973. "A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices," Econometrica, Econometric Society, vol. 41(1), pages 135-155, January.
    4. Pierre Cizeau & Yanhui Liu & Martin Meyer & C. -K. Peng & H. Eugene Stanley, 1997. "Volatility distribution in the S&P500 Stock Index," Papers cond-mat/9708143, arXiv.org.
    5. Cizeau, Pierre & Liu, Yanhui & Meyer, Martin & Peng, C.-K. & Eugene Stanley, H., 1997. "Volatility distribution in the S&P500 stock index," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 245(3), pages 441-445.
    6. Liu, Yanhui & Cizeau, Pierre & Meyer, Martin & Peng, C.-K. & Eugene Stanley, H., 1997. "Correlations in economic time series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 245(3), pages 437-440.
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