For example, the Asian lunch hour is contracted and the afternoon period, when both the European and New York markets are open, is expanded. Apart from the daily and weekly seasonality, Olsen applies business time in a more general way. During any period of high activity, the scale at which the activity is measured is made more fine so that the full detail of the market dynamics is captured. The opposite applies during periods of low activity. The presence in the markets of a scaling law and seasonality leads to the possibility of forecasting.
Classical theory has no explanation.
Olsen believes the answer lies in the differences between market participants, a factor that classical theory does not address. Market Heterogeneity Market participants fall into broad groups defined by their trading objectives, their appetite for risk and their trading time frames. Foreign exchange dealers and market makers, for example, trade for profit at relatively high risk and at a high frequency, possibly several times a day. At the other extreme, central banks trade infrequently, usually for political or national economic reasons rather than for profit. Companies and pension fund investors may also trade infrequently and at low risk.