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Introduction of the Market-Based Price Autocorrelation

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  • Olkhov, Victor

Abstract

This paper considers direct dependence of the market price autocorrelation on statistical moments of the market trades as a must necessary requirement. We regard market time-series of the trade value and volume as origin of price time-series. That determines dependence of the market-based averaging of price on averaging of the trade value and volume time-series. We introduce the market-based price statistical moments as functions of the statistical moments of trade value and volume. Moving average helps define the market-based price statistical moments with time-lag and introduce the price time autocorrelation as function of time-lag statistical moments of the trade value and volume. Statistical moments of the market trade value and volume are determined by conventional frequency-based probability measures. However, the price statistical moments and the price autocorrelation in particular are determined by the market-based probability measure that differs from the conventional frequency-based price probability. That distinction leads to different treatments of the price autocorrelation via market-based and frequency-based approach. To assess market dependence of price statistical moments and price autocorrelation one should revise results founded on frequency-based approach.

Suggested Citation

  • Olkhov, Victor, 2022. "Introduction of the Market-Based Price Autocorrelation," MPRA Paper 112003, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:112003
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    Cited by:

    1. Victor Olkhov, 2022. "Price and Payoff Autocorrelations in a Multi-Period Consumption-Based Asset Pricing Model," Papers 2204.07506, arXiv.org, revised Mar 2024.
    2. Olkhov, Victor, 2014. "Expressions of market-based correlations between prices and returns of two assets," MPRA Paper 123009, University Library of Munich, Germany.
    3. Olkhov, Victor, 2022. "Price and Payoff Autocorrelations in the Consumption-Based Asset Pricing Model," MPRA Paper 112255, University Library of Munich, Germany.

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    More about this item

    Keywords

    asset pricing; price probability; autocorrelation; market trades;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C80 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - General
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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