Exogenous and endogenous price jumps belong to different dynamical classes. (1st February 2022)

• Record Type: Journal Article
• Authors: Marcaccioli, Riccardo; Bouchaud, Jean-Philippe; Benzaquen, Michael
• Is Part Of: Journal of statistical mechanics. (2022:Feb.)
• Publication Date: 2022-02-01
• Subjects: market microstructure, market impact -- critical phenomena of socio-economic systems -- quantitative finance; Statistical mechanics -- Periodicals; Mechanics -- Statistical methods -- Periodicals; 530.1305
• DOI: 10.1088/1742-5468/ac498c
• Languages: English
• ISSNs: 1742-5468

Abstract

Abstract: Synchronising a database of stock specific news with 5 years worth of order book data on 300 stocks, we show that abnormal price movements following news releases (exogenous) exhibit markedly different dynamical features from those arising spontaneously (endogenous). On average, large volatility fluctuations induced by exogenous events occur abruptly and are followed by a decaying power-law relaxation, while endogenous price jumps are characterized by progressively accelerating growth of volatility, also followed by a power-law relaxation, but slower than for exogenous jumps. Remarkably, our results are reminiscent of what is observed in different contexts, namely Amazon book sales and YouTube views. Finally, we show that fitting power-laws to individual volatility profiles allows one to classify large events into endogenous and exogenous dynamical classes, without relying on the news feed.