Weighted-indexed semi-Markov models for modeling financial returns
AbstractIn this paper we propose a new stochastic model based on a generalization of semi-Markov chains to study the high frequency price dynamics of traded stocks. We assume that the financial returns are described by a weighted indexed semi-Markov chain model. We show, through Monte Carlo simulations, that the model is able to reproduce important stylized facts of financial time series as the first passage time distributions and the persistence of volatility. The model is applied to data from Italian and German stock market from first of January 2007 until end of December 2010.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1205.2551.
Date of creation: May 2012
Date of revision: Jun 2012
Publication status: Published in J. Stat. Mech., P07015, 2012
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-22 (All new papers)
- NEP-CMP-2012-05-22 (Computational Economics)
- NEP-ECM-2012-05-22 (Econometrics)
- NEP-ETS-2012-05-22 (Econometric Time Series)
- NEP-FMK-2012-05-22 (Financial Markets)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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