Empirical Laws Of A Stock Price Index And A Stochastic Model
AbstractRecent works by econo-physicists [5,8,15,19] have shown that the probability function of the share returns and the volatility satisfies a power law with an exponent close to 4. On the other hand, we investigated quantitatively the return and the volatility of the daily data of the Nikkei 225 index from 1990 to 2003, and we found that the distributions of the returns and the volatility can be accurately described by the exponential distributions . We then propose a stochastic model of stock markets that can reproduce these empirical laws. In our model the fluctuations of stock prices are caused by interactions among traders. We indicate that the model can reproduce the empirical facts mentioned above. In particular, we show that the interaction strengths among traders are a key variable that can distinguish the emergence of the exponential distribution or the power-law distribution.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by World Scientific Publishing Co. Pte. Ltd. in its journal Advances in Complex Systems.
Volume (Year): 06 (2003)
Issue (Month): 03 ()
Contact details of provider:
Web page: http://www.worldscinet.com/acs/acs.shtml
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Fabio Pizzutilo, 2013. "The Distribution of the Returns of Japanese Stocks and Portfolios," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(9), pages 1249-1259, September.
- Pan, Raj Kumar & Sinha, Sitabhra, 2008.
"Inverse-cubic law of index fluctuation distribution in Indian markets,"
Physica A: Statistical Mechanics and its Applications,
Elsevier, vol. 387(8), pages 2055-2065.
- Raj Kumar Pan & Sitabhra Sinha, 2006. "Inverse cubic law of index fluctuation distribution in Indian markets," Science & Finance (CFM) working paper archive physics/0607014, Science & Finance, Capital Fund Management, revised Dec 2007.
- Pichl, Lukáš & Kaizoji, Taisei & Yamano, Takuya, 2007. "Stylized facts in internal rates of return on stock index and its derivative transactions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 382(1), pages 219-227.
- Taisei Kaizoji, 2010.
"Stock volatility in the periods of booms and stagnations,"
EERI Research Paper Series
EERI_RP_2010_07, Economics and Econometrics Research Institute (EERI), Brussels.
- Kaizoji, Taisei, 2010. "Stock volatility in the periods of booms and stagnations," MPRA Paper 23727, University Library of Munich, Germany.
- Taisei Kaizoji, 2005. "Comparison of volatility distributions in the periods of booms and stagnations: an empirical study on stock price indices," Science & Finance (CFM) working paper archive physics/0506114, Science & Finance, Capital Fund Management.
- Taisei Kaizoji, 2013. "Modeling of Stock Returns and Trading Volume," Science & Finance (CFM) working paper archive 1309.2416, Science & Finance, Capital Fund Management.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tai Tone Lim).
If references are entirely missing, you can add them using this form.