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A statistical physics view of financial fluctuations: Evidence for scaling and universality

Listed author(s):
  • Stanley, H. Eugene
  • Plerou, Vasiliki
  • Gabaix, Xavier

The unique scaling behavior of financial time series have attracted the research interest of physicists. Variables such as stock returns, share volume, and number of trades have been found to display distributions that are consistent with a power-law tail. We present an overview of recent research joining practitioners of economic theory and statistical physics to try to understand better some puzzles regarding economic fluctuations. One of these puzzles is how to describe outliers, i.e. phenomena that lie outside of patterns of statistical regularity. We review recent research, which suggests that such outliers may not in fact exist and that the same laws seem to govern outliers as well as day-to-day fluctuations.

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File URL: http://www.sciencedirect.com/science/article/pii/S0378437108000903
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Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

Volume (Year): 387 (2008)
Issue (Month): 15 ()
Pages: 3967-3981

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Handle: RePEc:eee:phsmap:v:387:y:2008:i:15:p:3967-3981
DOI: 10.1016/j.physa.2008.01.093
Contact details of provider: Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

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  24. Podobnik, Boris & Ivanov, Plamen Ch. & Grosse, Ivo & Matia, Kaushik & Eugene Stanley, H., 2004. "ARCH–GARCH approaches to modeling high-frequency financial data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 344(1), pages 216-220.
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  28. Ivanov, Plamen Ch. & Podobnik, Boris & Lee, Youngki & Stanley, H.Eugene, 2001. "Truncated Lévy process with scale-invariant behavior," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 299(1), pages 154-160.
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  31. Carbone, Anna & Stanley, H. Eugene, 2007. "Scaling properties and entropy of long-range correlated time series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 384(1), pages 21-24.
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  34. F. Wang & P. Weber & K. Yamasaki & S. Havlin & H. E. Stanley, 2007. "Statistical regularities in the return intervals of volatility," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 55(2), pages 123-133, 01.
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  37. P. Gopikrishnan & M. Meyer & L.A.N. Amaral & H.E. Stanley, 1998. "Inverse cubic law for the distribution of stock price variations," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 3(2), pages 139-140, July.
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  39. S. V. Buldyrev & L. A. N. Amaral & S. Havlin & H. Leschhorn & P. Maass & M. A. Salinger & H. E. Stanley & M. H. R. Stanley, 1997. "Scaling behavior in economics: II. Modeling of company growth," Papers cond-mat/9702085, arXiv.org.
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