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Time-scale effects on the gain-loss asymmetry in stock indices

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  • Bulcs'u S'andor
  • Ingve Simonsen
  • B'alint Zsolt Nagy
  • Zolt'an N'eda

Abstract

The gain-loss asymmetry, observed in the inverse statistics of stock indices is present for logarithmic return levels that are over $2\%$, and it is the result of the non-Pearson type auto-correlations in the index. These non-Pearson type correlations can be viewed also as functionally dependent daily volatilities, extending for a finite time interval. A generalized time-window shuffling method is used to show the existence of such auto-correlations. Their characteristic time-scale proves to be smaller (less than $25$ trading days) than what was previously believed. It is also found that this characteristic time-scale has decreased with the appearance of program trading in the stock market transactions. Connections with the leverage effect are also established.

Suggested Citation

  • Bulcs'u S'andor & Ingve Simonsen & B'alint Zsolt Nagy & Zolt'an N'eda, 2016. "Time-scale effects on the gain-loss asymmetry in stock indices," Papers 1608.04506, arXiv.org, revised Aug 2016.
    • Handle: RePEc:arx:papers:1608.04506
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    Cited by:

    1. Andrea Di Iura & Giulia Terenzi, 2022. "A Bayesian analysis of gain-loss asymmetry," SN Business & Economics, Springer, vol. 2(5), pages 1-23, May.
    2. Rodríguez-Martínez, C.M. & Coronel-Brizio, H.F. & Hernández-Montoya, A.R., 2021. "A multi-scale symmetry analysis of uninterrupted trends returns in daily financial indices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 574(C).
    3. C. M. Rodr'iguez-Mart'inez & H. F. Coronel-Brizio & A. R. Hern'andez-Montoya, 2019. "A multi-scale symmetry analysis of uninterrupted trends returns of daily financial indices," Papers 1908.11204, arXiv.org.
    4. Andrea Giuseppe Di Iura & Giulia Terenzi, 2021. "A Bayesian analysis of gain-loss asymmetry," Papers 2104.06044, arXiv.org.

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