Large-volatility dynamics in financial markets

TL;DR

This study analyzes large-volatility dynamics in Chinese and German financial markets, revealing power-law relaxation, time-reversal symmetry at short scales, and the influence of exogenous events on market non-stationarity.

Contribution

It provides a comparative analysis of large-volatility dynamics across two major markets, highlighting the role of exogenous events and scale-dependent symmetry properties.

Findings

Power-law relaxation before and after large volatilities

Time-reversal symmetry at minute scale, asymmetry at daily scale

Exogenous events induce non-stationarity and asymmetry

Abstract

We investigate the large-volatility dynamics in financial markets, based on the minute-to-minute and daily data of the Chinese Indices and German DAX. The dynamic relaxation both before and after large volatilities is characterized by a power law, and the exponents $p_\pm$ usually vary with the strength of the large volatilities. The large-volatility dynamics is time-reversal symmetric at the time scale in minutes, while asymmetric at the daily time scale. Careful analysis reveals that the time-reversal asymmetry is mainly induced by exogenous events. It is also the exogenous events which drive the financial dynamics to a non-stationary state. Different characteristics of the Chinese and German stock markets are uncovered.