Ecological and Coevolutionary Dynamics in Modern Markets Yield Nonstationarity in Market Efficiencies

Figure 2

(a) The number of active trading venues and realized opportunity cost (ROC), normalized to have zero mean and unit variance, are negatively correlated. (b) Estimates of their power spectral densities allow for assessment of the stationarity of the time series. The inset demonstrates the granger-causal relationship between venues and ROC (venues ROC). (c) The time series of fluctuation in the number of trading venues and the latent intensity time series of a hypothesized Hawkes process model for venue fluctuation. The inset panel displays the convergence for this model. (d) Cumulative fluctuation for each exchange over the study period. The first inset plot shows the total percent of time under study that each venue was active, and the second inset plot displays a negative association between fluctuation and total percent of time that a venue was active.