Heavy-tail driven by memory
AbstractWe propose a stochastic process driven by memory effect with novel distributions including both exponential and leptokurtic heavy-tailed distributions. A class of distribution is analytically derived from the continuum limit of the discrete binary process with the renormalized auto-correlation and the closed form moment generating function is obtained, thus the cumulants are calculated and shown to be convergent. The other class of distributions are numerically investigated. The concoction of the two stochastic processes of the different signs of memory under regime switching mechanism does incarnate power-law decay behavior, which strongly implies that memory is the alternative origin of heavy-tail.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1201.5690.
Date of creation: Jan 2012
Date of revision: May 2013
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-15 (All new papers)
- NEP-ETS-2012-02-15 (Econometric Time Series)
- NEP-UPT-2012-02-15 (Utility Models & Prospect Theory)
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