Economics, Econometrics and Finance
5 years ago

Study reveals asset price volatility linked to market extremum shifts.

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Discrete and Continuous Dynamical Systems - B
Asset price volatility and price extrema
Carey Caginalp, Gunduz Caginalp

Paper Summary

Price volatility is highest when expected prices change rapidly, with volatility peaking before expected prices do. Randomness in prices comes from supply and demand, not just empirical randomness. The variance in price changes reflects this randomness. Supply and demand are influenced by how far the asset's value deviates from its fundamental value.

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