JSE market micro-structure

Abstract

Stylized facts play a significant role in the testing whether models agree with known statistical anomalies and phenomena that occur in financial markets or not. Thus, we can use these stylized facts as a modelling tool or just to understand the general behavior of financial markets better. In the paper by Bouchaud et al in 2004 [1] we see the promotion of a new stylized fact that correlations in trade signs fail to die out, even after large lags. In fact, Bouchaud et al expressed the correlations as a slow power-law decay over trade ticks. In the results of our empirical study of JSE and BM&FBOVESP we find that the selected stocks show the this same power-law decay of correlations of trade signs. We also find that the stocks behave in a way which may allow for price manipulation at high enough trading rates as discussed by Gatheral [2].