Emergence of statistically validated financial intraday lead-lag relationships

Rosario Nunzio Mantegna, Michele Tumminello, Rosario N. Mantegna, Dror Y. Kenett, H. Eugene Stanley, Chester Curme

Risultato della ricerca: Article

28 Citazioni (Scopus)

Abstract

According to the leading models in modern finance, the presence of intraday lead-lag relationships between financial assets is negligible in efficient markets. With the advance of technology, however, markets have become more sophisticated. To determine whether this has resulted in an improved market efficiency, we investigate whether statistically significant lagged correlation relationships exist in financial markets. We introduce a numerical method to statistically validate links in correlation-based networks, and employ our method to study lagged correlation networks of equity returns in financial markets. Crucially, our statistical validation of lead-lag relationships accounts for multiple hypothesis testing over all stock pairs. In an analysis of intraday transaction data from the periods 2002–2003 and 2011–2012, we find a striking growth in the networks as we increase the frequency with which we sample returns. We compute how the number of validated links and the magnitude of correlations change with increasing sampling frequency, and compare the results between the two data-sets. Finally, we compare topological properties of the directed correlation-based networks from the two periods using the in-degree and out-degree distributions and an analysis of three-node motifs. Our analysis suggests a growth in both the efficiency and instability of financial markets over the past decade.
Lingua originaleEnglish
pagine (da-a)1375-1386
Numero di pagine12
RivistaQuantitative Finance
Volume15
Stato di pubblicazionePublished - 2015

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Lead-lag relationship
Financial markets
Sampling
Efficient markets
Node
Equity returns
Market efficiency
Hypothesis testing
Finance
Transaction data
Numerical methods
Financial assets

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics, Econometrics and Finance(all)

Cita questo

Mantegna, R. N., Tumminello, M., Mantegna, R. N., Kenett, D. Y., Stanley, H. E., & Curme, C. (2015). Emergence of statistically validated financial intraday lead-lag relationships. Quantitative Finance, 15, 1375-1386.

Emergence of statistically validated financial intraday lead-lag relationships. / Mantegna, Rosario Nunzio; Tumminello, Michele; Mantegna, Rosario N.; Kenett, Dror Y.; Stanley, H. Eugene; Curme, Chester.

In: Quantitative Finance, Vol. 15, 2015, pag. 1375-1386.

Risultato della ricerca: Article

Mantegna, RN, Tumminello, M, Mantegna, RN, Kenett, DY, Stanley, HE & Curme, C 2015, 'Emergence of statistically validated financial intraday lead-lag relationships', Quantitative Finance, vol. 15, pagg. 1375-1386.
Mantegna, Rosario Nunzio ; Tumminello, Michele ; Mantegna, Rosario N. ; Kenett, Dror Y. ; Stanley, H. Eugene ; Curme, Chester. / Emergence of statistically validated financial intraday lead-lag relationships. In: Quantitative Finance. 2015 ; Vol. 15. pagg. 1375-1386.
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AU - Stanley, H. Eugene

AU - Curme, Chester

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