Investment strategies used as spectroscopy of financial markets reveal new stylized facts.

We propose a new set of stylized facts quantifying the structure of financial markets. The key idea is to study the combined structure of both investment strategies and prices in order to open a qualitatively new level of understanding of financial and economic markets. We study the detailed order f...

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Autores principales:	Wei-Xing Zhou, Guo-Hua Mu, Wei Chen, Didier Sornette
Formato:	article
Lenguaje:	EN
Publicado:	Public Library of Science (PLoS) 2011
Materias:	Medicine R Science Q
Acceso en línea:	https://doaj.org/article/0fd3420ec8ec48eda1e0ef458c783e5d
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spelling	oai:doaj.org-article:0fd3420ec8ec48eda1e0ef458c783e5d2021-11-04T06:08:38ZInvestment strategies used as spectroscopy of financial markets reveal new stylized facts.1932-620310.1371/journal.pone.0024391https://doaj.org/article/0fd3420ec8ec48eda1e0ef458c783e5d2011-01-01T00:00:00Zhttps://www.ncbi.nlm.nih.gov/pmc/articles/pmid/21935403/?tool=EBIhttps://doaj.org/toc/1932-6203We propose a new set of stylized facts quantifying the structure of financial markets. The key idea is to study the combined structure of both investment strategies and prices in order to open a qualitatively new level of understanding of financial and economic markets. We study the detailed order flow on the Shenzhen Stock Exchange of China for the whole year of 2003. This enormous dataset allows us to compare (i) a closed national market (A-shares) with an international market (B-shares), (ii) individuals and institutions, and (iii) real traders to random strategies with respect to timing that share otherwise all other characteristics. We find in general that more trading results in smaller net return due to trading frictions, with the exception that the net return is independent of the trading frequency for A-share individual traders. We unveiled quantitative power laws with non-trivial exponents, that quantify the deterioration of performance with frequency and with holding period of the strategies used by traders. Random strategies are found to perform much better than real ones, both for winners and losers. Surprising large arbitrage opportunities exist, especially when using zero-intelligence strategies. This is a diagnostic of possible inefficiencies of these financial markets.Wei-Xing ZhouGuo-Hua MuWei ChenDidier SornettePublic Library of Science (PLoS)articleMedicineRScienceQENPLoS ONE, Vol 6, Iss 9, p e24391 (2011)
institution	DOAJ
collection	DOAJ
language	EN
topic	Medicine R Science Q
spellingShingle	Medicine R Science Q Wei-Xing Zhou Guo-Hua Mu Wei Chen Didier Sornette Investment strategies used as spectroscopy of financial markets reveal new stylized facts.
description	We propose a new set of stylized facts quantifying the structure of financial markets. The key idea is to study the combined structure of both investment strategies and prices in order to open a qualitatively new level of understanding of financial and economic markets. We study the detailed order flow on the Shenzhen Stock Exchange of China for the whole year of 2003. This enormous dataset allows us to compare (i) a closed national market (A-shares) with an international market (B-shares), (ii) individuals and institutions, and (iii) real traders to random strategies with respect to timing that share otherwise all other characteristics. We find in general that more trading results in smaller net return due to trading frictions, with the exception that the net return is independent of the trading frequency for A-share individual traders. We unveiled quantitative power laws with non-trivial exponents, that quantify the deterioration of performance with frequency and with holding period of the strategies used by traders. Random strategies are found to perform much better than real ones, both for winners and losers. Surprising large arbitrage opportunities exist, especially when using zero-intelligence strategies. This is a diagnostic of possible inefficiencies of these financial markets.
format	article
author	Wei-Xing Zhou Guo-Hua Mu Wei Chen Didier Sornette
author_facet	Wei-Xing Zhou Guo-Hua Mu Wei Chen Didier Sornette
author_sort	Wei-Xing Zhou
title	Investment strategies used as spectroscopy of financial markets reveal new stylized facts.
title_short	Investment strategies used as spectroscopy of financial markets reveal new stylized facts.
title_full	Investment strategies used as spectroscopy of financial markets reveal new stylized facts.
title_fullStr	Investment strategies used as spectroscopy of financial markets reveal new stylized facts.
title_full_unstemmed	Investment strategies used as spectroscopy of financial markets reveal new stylized facts.
title_sort	investment strategies used as spectroscopy of financial markets reveal new stylized facts.
publisher	Public Library of Science (PLoS)
publishDate	2011
url	https://doaj.org/article/0fd3420ec8ec48eda1e0ef458c783e5d
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Investment strategies used as spectroscopy of financial markets reveal new stylized facts.

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