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Introduction of the Market-Based Price Autocorrelation

Olkhov, Victor (2022): Introduction of the Market-Based Price Autocorrelation.

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Abstract

This paper considers direct dependence of the market price autocorrelation on statistical moments of the market trades as a must necessary requirement. We regard market time-series of the trade value and volume as origin of price time-series. That determines dependence of the market-based averaging of price on averaging of the trade value and volume time-series. We introduce the market-based price statistical moments as functions of the statistical moments of trade value and volume. Moving average helps define the market-based price statistical moments with time-lag and introduce the price time autocorrelation as function of time-lag statistical moments of the trade value and volume. Statistical moments of the market trade value and volume are determined by conventional frequency-based probability measures. However, the price statistical moments and the price autocorrelation in particular are determined by the market-based probability measure that differs from the conventional frequency-based price probability. That distinction leads to different treatments of the price autocorrelation via market-based and frequency-based approach. To assess market dependence of price statistical moments and price autocorrelation one should revise results founded on frequency-based approach.

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