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The Variation of Certain Speculative Prices

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  • Benoit Mandelbrot

Abstract

The purpose of this chapter is to present and test a new model of price behavior in speculative markets. The principal feature of this model is that starting from the Bachelier process as applied to InZ(t) instead of Z(t), the Gaussian distribution is replaced throughout by another family of probability laws to be referred to as stable Paretian. In a somewhat complex way, the Gaussian is a limiting case of this new family, so the new model proposed in this chapter is actually a generalization of the continuous random walk of Bachelier.
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Suggested Citation

  • Benoit Mandelbrot, 1963. "The Variation of Certain Speculative Prices," The Journal of Business, University of Chicago Press, vol. 36, pages 394-394.
    • Handle: RePEc:ucp:jnlbus:v:36:y:1963:p:394
    DOI: 10.1086/294632
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    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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