Exponentially damped Lévy flights
Since real processes seem to departure from standard Lévy distributions, modifications to the latter have been suggested in literature. These include (abruptly) truncated (Phys. Rev. Lett. 73 (1994) 2946), smoothly truncated (Phys. Rev. E 52 (1995) 1197; Phys. Lett. A 266 (2000) 282) and gradually truncated Lévy flights (Physica A 268 (1999) 231; Physica A 275 (2000) 531). We put forward what we call an exponentially damped Lévy flight which encompasses the previous cases. In the presence of increasing and positive feedbacks, our distribution is assumed to deviate from the Lévy in both a smooth and gradual fashion. We estimate the truncation parameters by nonlinear least squares to optimally fit the distribution tails. That is a novel approach for estimating parameters α and γ of the Lévy. The method is illustrated with daily data on exchange rates for 15 countries against the US dollar. Our results show that the exponentially damped Lévy flight fits the data well when increasing and positive deviations are present.
Volume (Year): 326 (2003)
Issue (Month): 3 ()
|Contact details of provider:|| Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/|
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.:
- Sergio Da Silva, 2004.
"Autocorrelation as a Source of Truncated Levy Flights in Foreign Exchange Rates,"
- Figueiredo, Annibal & Gleria, Iram & Matsushita, Raul & Da Silva, Sergio, 2003. "Autocorrelation as a source of truncated Lévy flights in foreign exchange rates," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 323(C), pages 601-625.
- Andrew W. Lo & A. Craig MacKinlay, 1987.
"Stock Market Prices Do Not Follow Random Walks: Evidence From a Simple Specification Test,"
NBER Working Papers
2168, National Bureau of Economic Research, Inc.
- Andrew W. Lo, A. Craig MacKinlay, 1988. "Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 41-66.
- Benoit Mandelbrot, 1963. "The Variation of Certain Speculative Prices," The Journal of Business, University of Chicago Press, vol. 36, pages 394.
- Sergio Da Silva & Raul Matsushita & Iram Gleria, 2002. "Scaling power laws in the Sao Paulo Stock Exchange," Economics Bulletin, AccessEcon, vol. 7(3), pages 1-12.
When requesting a correction, please mention this item's handle: RePEc:eee:phsmap:v:326:y:2003:i:3:p:544-555. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.