Stochastic resonance and the trade arrival rate of stocks

TL;DR

This paper investigates how stochastic resonance influences the trade arrival rate in stocks, revealing that noise can enhance or suppress deterministic trading patterns in the U.S. stock market.

Contribution

It introduces a model of trade arrival rates incorporating stochastic resonance, demonstrating its presence in real market data.

Findings

Stochastic resonance affects trade arrival patterns

Noise can enhance detection of deterministic signals

Model parameters fit intra-day trading data

Abstract

We studied non-dynamical stochastic resonance for the number of trades in the stock market. The trade arrival rate presents a deterministic pattern that can be modeled by a cosine function perturbed by noise. Due to the nonlinear relationship between the rate and the observed number of trades, the noise can either enhance or suppress the detection of the deterministic pattern. By finding the parameters of our model with intra-day data, we describe the trading environment and illustrate the presence of SR in the trade arrival rate of stocks in the U.S. market.