The key role of liquidity fluctuations in determining large price changes

Fluctuation and Noise Letters

Volumn 5, Issue 2, 2005, Pages

  Lillo, Fabrizio ^a   Farmer, J Doyne ^b  

^a Dipartimento di Fisica e Tecnologie Relative   (Italy)

^b SANTA FE INSTITUTE   (United States)

Author keywords

Financial markets; Long memory processes; Power law distributions

Indexed keywords

EID: 23744499955     PISSN: 02194775     EISSN: None     Source Type: Journal    
DOI: 10.1142/S0219477505002574     Document Type: Article

References (15)

1. B. B. Mandelbrot, The variation of certain speculative prices, J. Business 36 (1963) 394-419.
2. R. N. Mantegna and H. E. Stanley, Scaling behavior in the dynamics of an economic index Nature 376 (1995) 46-49.
3. R. N. Mantegna and H. E. Stanley, Introduction to econophysics: correlations and complexity in finance, Cambridge University Press, Cambridge (1999).
4. P. Gopikrishnan, M. Meyer, L. A. N. Amaral and H. E. Stanley, Inverse cubic law for the distribution of stock price variations, Eur. Phys. J. B 3 (1998) 139-140.
5. P. K. Clark, A subordinated stochastic process model with finite variance for speculative prices, Econometrica 41 (1973) 135-256.
6. X. Gabaix, P. Gopikrishnan, V. Plerou and H. E. Stanley, A theory for power-law distributions in financial market fluctuations, Nature 423 (2003) 267-270.
7. J. D. Farmer, L. Gillemot, F. Lillo, S. Mike and A. Sen, What really causes large price changes?, Quantitative Finance 4 (2004) 383-397. Preprint available at xxx.lanl.gov/cond-mat/0312703.
8. F. Lillo, J. D. Farmer and R. N. Mantegna, Master curve for price-impact function, Nature 421 (2003) 129-130.
9. M. Potters and J.-P. Bouchaud, More statistical properties of order books and price impact, Physica A 324 (2002) 133-140.
10. B. M. Hill, A simple general approach to inference about the tail of a distribution, Annals Statistics 3 (1975) 1163-1173.
11. J. Beran, Statistics for Long-Memory Processes, Chapman & Hall (1994).
12. J.-P. Bouchaud, Y. Gefen, M. Potters and M. Wyart, Fluctuations and response in financial markets: the subtle nature of 'random' price changes, Quantitative Finance 4 (2004) 176-190.
13. F. Lillo and J. D. Farmer, The long memory of efficient market, Studies in Nonlinear Dynamics and Econometrics 8 (2004) 1.
14. Z. Ding, C. W. J. Granger and R. Engle, A long-memory property of stock market returns and a new model, J. Empirical Finance 1 (1993) 83-106.
15. C.-K. Peng, S. V. Buldyrev, S. Havlin, M. Simons, H. E. Stanley and A. L. Goldberger, Mosaic organization of DNA nucleotides, Physical Review E 49 (1994) 1685-1689.