We use wavelets to decompose the volatility (standard deviation) of intraday (S&P500) return data across scales. We show that
when investigating two-point correlation functions of the volatility logarithms across different time scales, one reveals
the existence of a causal information cascade from large scales (i.e. small frequencies) to fine scales. We quantify and visualize the information flux across scales. We provide a possible interpretation
of our findings in terms of market dynamics.
PACS. 02.50.-r Probability theory, stochastic processes, and statistics -05.40.+j Fluctuation phenomena, random processes,
and Brownian motion -89.90.+n Other areas of general interest to physicists
Received: 9 January 1998 / Received in final form and accepted: 13
January 1998