The long memory of the efficient market
| dc.creator | Lillo, Fabrizio | |
| dc.creator | Farmer, J. Doyne | |
| dc.date | 2003-11-04 | |
| dc.date | 2004-07-26 | |
| dc.date.accessioned | 2026-07-07T12:06:50Z | |
| dc.date.available | 2026-07-07T12:06:50Z | |
| dc.description | For the London Stock Exchange we demonstrate that the signs of orders obey a long-memory process. The autocorrelation function decays roughly as $τ^{-α}$ with $α\approx 0.6$, corresponding to a Hurst exponent $H \approx 0.7$. This implies that the signs of future orders are quite predictable from the signs of past orders; all else being equal, this would suggest a very strong market inefficiency. We demonstrate, however, that fluctuations in order signs are compensated for by anti-correlated fluctuations in transaction size and liquidity, which are also long-memory processes. This tends to make the returns whiter. We show that some institutions display long-range memory and others don't. | |
| dc.description | 19 pages, 12 figures | |
| dc.identifier | https://arxiv.org/abs/cond-mat/0311053 | |
| dc.identifier | http://arxiv.org/abs/cond-mat/0311053 | |
| dc.identifier.uri | http://salesiana.dossiersoluciones.com/handle/123456789/208772 | |
| dc.subject | Other Condensed Matter | |
| dc.subject | Statistical Finance | |
| dc.title | The long memory of the efficient market | |
| dc.type | text |