Random diffusion and leverage effect in financial markets.
We prove that Brownian market models with random diffusion coefficients provide an exact measure of the leverage effect [J-P. Bouchaud et al., Phys. Rev. Lett. 87, 228701 (2001)]. This empirical fact asserts that past returns are anticorrelated with future diffusion coefficient. Several models with random diffusion have been suggested but without a quantitative study of the leverage effect. Our analysis lets us to fully estimate all parameters involved and allows a deeper study of correlated random diffusion models that may have practical implications for many aspects of financial markets.
Perelló
Josep
J
Departament de Física Fonamental, Universitat de Barcelona, Diagonal 647, Spain. perello@ffn.ub.es
Masoliver
Jaume
J