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The non-random walk of stock prices: The long-term correlation between signs and sizes

Abstract:

We investigate the random walk of prices by developing a simple model relating the properties of the signs and absolute values of individual price changes to the diffusion rate (volatility) of prices at longer time scales. We show that this benchmark model is unable to reproduce the diffusion properties of real prices. Specifically, we find that for one hour intervals this model consistently over-predicts the volatility of real price series by about 70%, and that this effect becomes stronger ...

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Publication status:
Published

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Publisher copy:
10.1140/epjb/e2008-00244-4

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Institution:
University of Oxford
Department:
Oxford, MPLS, Mathematical Inst
Journal:
EUROPEAN PHYSICAL JOURNAL B
Volume:
64
Issue:
3-4
Pages:
607-614
Publication date:
2007-11-28
DOI:
EISSN:
1434-6036
ISSN:
1434-6028
URN:
uuid:82582723-9396-43eb-8577-d133b5a2c543
Source identifiers:
387677
Local pid:
pubs:387677
Language:
English
Keywords:

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