title: Intrinsic Multi-Scale Dynamic Behaviors of Complex Financial Systems.
abstract: The empirical mode decomposition is applied to analyze the intrinsic multi-scale dynamic behaviors of complex financial systems. In this approach, the time series of the price returns of each stock is decomposed into a small number of intrinsic mode functions, which represent the price motion from high frequency to low frequency. These intrinsic mode functions are then grouped into three modes, i.e., the fast mode, medium mode and slow mode. The probability distribution of returns and auto-correlation of volatilities for the fast and medium modes exhibit similar behaviors as those of the full time series, i.e., these characteristics are rather robust in multi time scale. However, the cross-correlation between individual stocks and the return-volatility correlation are time scale dependent. The structure of business sectors is mainly governed by the fast mode when returns are sampled at a couple of days, while by the medium mode when returns are sampled at dozens of days. More importantly, the leverage and anti-leverage effects are dominated by the medium mode.
authors.affiliation: Department of Physics, Zhejiang University, Hangzhou 310027, China; School of Electronics and Information, Zhejiang University of Media and Communications, Hangzhou 310018, China; Collaborative Innovation Center of Advanced Microstructures, Nanjing 210093, China.
authors.forename: Fang-Yan
authors.initials: FY
authors.lastname: Ouyang
authors.affiliation: Department of Physics, Zhejiang University, Hangzhou 310027, China; Collaborative Innovation Center of Advanced Microstructures, Nanjing 210093, China.
authors.forename: Bo
authors.initials: B
authors.lastname: Zheng
authors.affiliation: Department of Physics, Zhejiang University, Hangzhou 310027, China.
authors.forename: Xiong-Fei
authors.initials: XF
authors.lastname: Jiang
mesh_terms: D000465:Algorithms; D003132:Commerce / Q000191:economics*; D006801:Humans; D007449:Investments / Q000191:economics*; D040541:Marketing / Q000191:economics / Q000639:trends*; D018803:Models, Economic