We address the question of how stock prices respond to changes in demand. We quantify the relations between price change $G$ over a time interval $\Delta t$ and two different measures of demand fluctuations: (a) $\Phi$, defined as the difference between the number of buyer-initiated and...

Stock price changes occur through transactions, just as diffusion in physical systems occurs through molecular collisions. We systematically explore this analogy and quantify the relation between trading activity - measured by the number of transactions $N_{\Delta t}$ - and the price change...

We present a theory of excess stock market volatility, in which market movements are due to trades by very large institutional investors in relatively illiquid markets. Such trades generate significant spikes in returns and volume, even in the absence of important news about fundamentals. We...

We quantitatively investigate the ideas behind the often-expressed adage `it takes volume to move stock prices', and study the statistical properties of the number of shares traded $Q_{\Delta t}$ for a given stock in a fixed time interval $\Delta t$. We analyze transaction data for the largest...

We respond to the issues discussed by Farmer and Lillo (FL) related to our proposed approach to understanding the origin of power-law distributions in stock price fluctuations. First, we extend our previous analysis to 1000 US stocks and perform a new estimation of market impact that accounts...

We present a theory of excess stock market volatility, in which market movements are due to trades by very large institutional investors in relatively illiquid markets. Such trades generate significant spikes in returns and volume, even in the absence of important news about fundamentals. We...

We survey a theory of the economic underpinnings of the fat-tailed distributions of a number of financial variables, such as returns and trading volumes. Our theory posits that they have a common origin in the strategic trading behavior of very large financial institutions in a relatively...

This manuscript is a brief summary of a talk designed to address the question of whether two of the pillars of the field of phase transitions and critical phenomena—scale invariance and universality—can be useful in guiding research on interpreting empirical data on economic fluctuations....

Firms having similar business activities are correlated. We analyze two different cross-correlation matrices C constructed from (i) 30-min price fluctuations of 1000 US stocks for the 2-year period 1994-95 and (ii) 1-day price fluctuations of 422 US stocks for the 35-year period 1962-96. We find...