| Finally, Wu noted a weakness of his data binning scheme: it is good
only for detecting simultaneous movement of the markets. |
| After Taiwan's former president
gave his "Theory of Two States" speech, the ensuing political crisis caused both markets to
fall over 20%. Yet the driven IFS shows little correlation, presumably because each market
reacted also to internal forces not synchronized with those of the other market. This could be
explored by |
| comparing movement of one stock today with that of the other one day in the past,
then two day |
| in the past, and so on. |
|
| If a strong pattern appeared, that would be evidence
that an important time lag had been found in the interactions between the markets. |