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Market-Based Price Autocorrelation

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  • Olkhov, Victor

Abstract

This paper assumes that the randomness of market trade values and volumes determines the properties of stochastic market prices. We derive the direct dependence of the first two price statistical moments and price volatility on statistical moments, volatilities, and correlations of market trade values and volumes. That helps describe the dependence of market-based price autocorrelation between times t and t-τ on statistical moments and correlations between trade values and volumes. That highlights the impact of the randomness of the size of market deals on price statistical moments and autocorrelation. Statistical moments and correlations of market trade values and volumes are assessed by conventional frequency-based probabilities. The distinctions between market-based price autocorrelation and autocorrelation that are assessed by the frequency-based probability analysis of price time series reveal the different approaches to the definitions of price probabilities. To forecast market-based price autocorrelation, one should predict the statistical moments and correlations of trade values and volumes.

Suggested Citation

  • Olkhov, Victor, 2022. "Market-Based Price Autocorrelation," MPRA Paper 120288, University Library of Munich, Germany, revised 26 Feb 2024.
    • Handle: RePEc:pra:mprapa:120288
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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, 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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