Local fluctuations of the signed traded volumes and the dependencies of demands: a copula analysis

Abstract

We investigate how the local fluctuations of the signed traded volumes affect the dependence of demands between stocks. We analyze the empirical dependence of demands using copulas and show that they are well described by a bivariate $\mathcal{K}$ copula density function. We find that large local fluctuations strongly increase the positive dependence but lower slightly the negative one in the copula density. This interesting feature is due to cross-correlations of volume imbalances between stocks. Also, we explore the asymmetries of tail dependencies of the copula density, which are moderate for the negative dependencies but strong for the positive ones. For the latter, we reveal that large local fluctuations of the signed traded volumes trigger stronger dependencies of demands than of supplies, probably indicating a bull market with persistent raising of prices.