The angular distribution of asset returns in delay space (Q5953154)

Summary: Plotting asset returns against themselves with a one-period lag reveals the ``compass rose'' pattern of \textit{T. F. Crack} and \textit{O. Ledoit} [``Robust Structures Without Predictability: The `Compass Rose' Pattern of the Stock Market'', J. Finance 61, 751-762 (1996)]. They describe the pattern, caused by discreteness, as ``subjective''. We develop a new and original set of ``objective'' statistical procedures to quantify the compass rose and detect changes in it. Comparing empirical and bootstrapped ``theta histograms'' permits hypothesis testing. Simulations suggest that intertemporal statistical dependence skews the campass rose in ways that mimic ARCH phenomena. Using our techniques on ``credit ruble'' data, we test the hypothesis that ``Big Players'' influence the degree of this ``X-skewing'' and, therefore, apparent ARCH behavior.