A distribution-based method to gauge market liquidity through scale invariance between investment horizons
| Autor: | Augusto Pianese, Sergio Bianchi, Massimiliano Frezza |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2020 |
| Předmět: |
liquidity
Self-similarity self-similarity Nonparametric statistics scale invariance Management Science and Operations Research Scale invariance Investment (macroeconomics) General Business Management and Accounting Stability (probability) fractal market hypothesis investment horizons Market liquidity Fractal Modeling and Simulation Econometrics Scaling Mathematics |
| Popis: | A nonparametric method is developed to detect self‐similarity among the rescaled distributions of the log‐price variations over a number of time scales. The procedure allows to test the statistical significance of the scaling exponent that possibly characterizes each pair of time scales and to analyze the link between self‐similarity and liquidity, the core assumption of the fractal market hypothesis. The method can support financial operators in the selection of the investment horizons as well as regulators in the adoption of guidelines to improve the stability of markets. The analysis performed on the S&P500 reveals a very complex, time‐changing scaling structure, which confirms the link between market liquidity and self‐similarity. |
| Databáze: | OpenAIRE |
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