Two-phase phenomena and volatility clusterings in financial markets

Abstract

We study the two-phase phenomenon of financial markets for three different markets: stock, foreign exchange, and futures exchange markets. Based on these results, we extract the burst phase series from the original returns time series. In this work, we show that the burst phase does not follow the simple random Poisson process and its inter-burst phase intervals (IBIs) exhibit a weak correlation. On comparison with the duration series of inter-laminar phase intervals (ILIs), the previous result implies that the volatility clustering observed in most financial markets is due mainly to the correlation of the IBIs, not to the duration of a burst phase.