The Price of Granularity and Fractional Finance

Tapiero, Charles S.; Tapiero, Oren J.; Jumarie, Guy

doi:10.2139/ssrn.2581181

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Fractal Market Hypothesis Liquidity and Distributions1

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2020

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“…Assumption (II) is the core of the FMH and it is also the quintessential of the notion of granularity described by Reference . The reasonable statement that the time scale dictates how market participants perceive and weigh the incoming information requires to be measured somehow.…”

Section: Fractal Market Hypothesis Liquidity and Distributionsmentioning

confidence: 99%

A distribution‐based method to gauge market liquidity through scale invariance between investment horizons

Bianchi

Pianese

Frezza

2020

Appl Stoch Models Bus & Ind

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A nonparametric method is developed to detect self-similarity among the rescaled distributions of the log-price variations over a number of time scales. The procedure allows to test the statistical significance of the scaling exponent that possibly characterizes each pair of time scales and to analyze the link between self-similarity and liquidity, the core assumption of the fractal market hypothesis. The method can support financial operators in the selection of the investment horizons as well as regulators in the adoption of guidelines to improve the stability of markets. The analysis performed on the S&P500 reveals a very complex, time-changing scaling structure, which confirms the link between market liquidity and self-similarity.

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Section: Fractal Market Hypothesis Liquidity and Distributionsmentioning

confidence: 99%