Temporal structure and gain-loss asymmetry for real and artificial stock indices.
Previous research has shown that for stock indices, the most likely time until a return of a particular size has been observed is longer for gains than for losses. We demonstrate that this so-called gain-loss asymmetry vanishes if the temporal dependence structure is destroyed by scrambling the time series. We also show that an artificial index constructed by a simple average of a number of individual stocks display gain-loss asymmetry-this allows us to explicitly analyze the dependence between the index constituents. We consider mutual information and correlation-based measures and show that the stock returns indeed have a higher degree of dependence in times of market downturns than upturns.
Siven
Johannes Vitalis
JV
Saxo Bank A/S, Philip Heymans Allé 15, DK-2900 Hellerup, Denmark. jvs@saxobank.com
Lins
Jeffrey Todd
JT