IDEAS home Printed from https://ideas.repec.org/h/spr/sprchp/978-1-4757-2763-0_14.html
   My bibliography  Save this book chapter

The variation of certain speculative prices

In: Fractals and Scaling in Finance

Author

Listed:
  • Benoit B. Mandelbrot

    (Yale University, Mathematics Department)

Abstract

The classic model of the temporal variation of speculative prices (Bachelier 1900) assumes that successive changes of a price Z(t) are independent Gaussian random variables. But, even if Z(t) is replaced by log Z(t),this model is contradicted by facts in four ways, at least: (1) Large price changes are much more frequent than predicted by the Gaussian; this reflects the “excessively peaked” (“leptokurtic”) character of price relatives, which has been well-established since at least 1915. (2) Large practically instantaneous price changes occur often, contrary to prediction, and it seems that they must be explained by causal rather than stochastic models. (3) Successive price changes do not “look” independent, but rather exhibit a large number of recognizable patterns, which are, of course, the basis of the technical analysis of stocks. (4) Price records do not look stationary, and statistical expressions such as the sample variance take very different values at different times; this nonstationarity seems to put a precise statistical model of price change out of the question.

Suggested Citation

  • Benoit B. Mandelbrot, 1997. "The variation of certain speculative prices," Springer Books, in: Fractals and Scaling in Finance, chapter 0, pages 371-418, Springer.
    • Handle: RePEc:spr:sprchp:978-1-4757-2763-0_14
    DOI: 10.1007/978-1-4757-2763-0_14
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:sprchp:978-1-4757-2763-0_14. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.