Nonrandom price movements

- Inter peak and valley times for prices provide a statistic capable of differentiating between mean reversion and momentum.
- Under the stylized financial models the expected inter peak and valley times are four units of time.
- The observations in data are statistically significantly below 4 units of time.
- The observations support tentatively the presence of some mean reversion.

Local peaks and valleys are constructed as time points with prices respectively above and below the two adjacent values. We demonstrate, quite generally, that under stylized financial model assumptions, the expected inter peak and inter valley times should be 4 days. The times observed in data are statistically significantly below this value, possibly questioning stylized assumptions. Our investigation thereby lends some support to the presence of mean reversion and the related activities of technical and algorithmic traders seeking to benefit from such a structure.