Hidden Forces and Fluctuations from Moving Averages: A Test Study

The possibility that price dynamics is affected by its distance from a moving average has been recently introduced as new statistical tool. The purpose is to identify the tendency of the price dynamics to be attractive or repulsive with respect to its own moving average. We consider a number of test...

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Bibliographic Details
Main Authors Alfi, V, Coccetti, F, Marotta, M, Pietronero, L, Takayasu, M
Format Journal Article
LanguageEnglish
Published 12.01.2006
Subjects
Physics - Physics and Society
Quantitative Finance - Trading and Microstructure
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Summary:The possibility that price dynamics is affected by its distance from a moving average has been recently introduced as new statistical tool. The purpose is to identify the tendency of the price dynamics to be attractive or repulsive with respect to its own moving average. We consider a number of tests for various models which clarify the advantages and limitations of this new approach. The analysis leads to the identification of an effective potential with respect to the moving average. Its specific implementation requires a detailed consideration of various effects which can alter the statistical methods used. However, the study of various model systems shows that this approach is indeed suitable to detect hidden forces in the market which go beyond usual correlations and volatility clustering.
DOI:10.48550/arxiv.physics/0601089