Price Stickiness and Viscosity in High-Frequency Market Data
Summary
The document asks how to measure “viscosity” in financial time series and considers whether extremes in a simple close-to-close price-change divided by volume measure could represent low or high ease of movement. The replies distinguish this elementary indicator idea from a microstructure interpretation based on intraday data, where price changes are constrained by order-book quantities and affected by tick-size rounding and bid-ask bounce.
One cited research approach models ultra-high-frequency price dynamics with uncertainty zones and estimates volatility together with a rounding adjustment parameter. That adjustment is offered as a possible proxy for the stickiness of a stock’s observed prices. A second reply uses viscosity informally to mean price stickiness. The document does not establish a general financial definition, validate the proposed close/volume calculation, or provide an empirical comparison. Its main lesson is that a useful measure depends on the time scale and market mechanism being studied; a basic daily ratio should not automatically be treated as a microstructure viscosity estimate.
Key ideas
- The proposed close-to-close change divided by volume is a tentative measure, not a validated viscosity statistic.
- At intraday scales, price movements interact with order-book depth and quantities.
- Tick-size rounding and bid-ask bounce can make observed prices appear sticky.
- An uncertainty-zones approach estimates volatility alongside a rounding adjustment that may proxy price stickiness.
- The document offers no universal definition or empirical validation of financial-market viscosity.
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Full text
# definition for "the viscosity" in financial market data series # definition for "the viscosity" in financial market data series I am willing to calculate and monitor the evolution of extreme-viscosity in the financial markets data series. Wikipedia says "Put simply, the less viscous the fluid is, the greater its ease of movement ". So rather than looking for the mighty viscosity should I simply focus on ease-of-movement? Well, the "ease of movement - (EOM)" is a catchy phrase since there is a well known indicator with the exact same name. That EOM indicator is defined in investopedia as: "A technical momentum indicator that is used to illustrate the relationship between the rate of an asset's price change and its volume. This indicator attempts to identify the amount of volume required to move prices." In elementary school mathematics it is as simple as: EOM = (Close of today - Close of yesterday) / Volume Do think "extreme viscosity can be monitored by the extremes in EOM"... Or would you suggest something else to calculate viscosity? ## Answer by lehalle (score 4) https://quant.stackexchange.com/a/3388 Using intra-day data, the concept of viscosity is easier to define. At the microstructure scale, you can see the price moves as a diffusion constrained by the quantities in the order books. Viscosity is a mix of pressure of volumes, rounding by the tick size, and bid-ask bounce. See for instance A New Approach for the Dynamics of Ultra-High-Frequency Data: The Model with Uncertainty Zones, by M Rosenbaum and C Y Robert, In Jnl of Financial Econometrics Volume 9, Issue 2, pp 344-366. In this paper, authors present a way to estimate simultaneously the volatility and a rounding adjustement level $\eta$ (eta). This parameter can be seen as the viscosity of the studied stock. ## Answer by Tom Au (score -2) https://quant.stackexchange.com/a/3349 A standard definition of "viscosity" is "stickiness. The MORE viscous something is, the LESS ease movement. So "viscosity" in this context would refer to the "stickiness" of one price compared to another in a time series.
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