Return Intervals Approach to Financial Fluctuations

Financial fluctuations play a key role for financial markets studies. A new approach focusing on properties of return intervals can help to get better understanding of the fluctuations. A return interval is defined as the time between two successive volatilities above a given threshold. We review recent studies and analyze the 1000 most traded stocks in the US stock markets. We find that the distribution of the return intervals has a well approximated scaling over a wide range of thresholds. The scaling is also valid for various time windows from one minute up to one trading day. Moreover, these results are universal for stocks of different countries, commodities, interest rates as well as currencies. Further analysis shows some systematic deviations from a scaling law, which are due to the nonlinear correlations in the volatility sequence. We also examine the memory in return intervals for different time scales, which are related to the long-term correlations in the volatility....

• Type: Conference
• Year: 2009
• Where: COMPLEX
• Authors: Fengzhong Wang, Kazuko Yamasaki, Shlomo Havlin, H. Eugene Stanley
• Keywords: COMPLEX 2009, Return Interval, Return Interval Distribution, Theoretical Computer Science, financial Markets Studies