Comparison of volatility distributions in the periods of booms and stagnations: an empirical study on stock price indices
The aim of this paper is to compare statistical properties of stock price indices in periods of booms with those in periods of stagnations. We use the daily data of the four stock price indices in the major stock markets in the world: (i) the Nikkei 225 index (Nikkei 225) from January 4, 1975 to August 18, 2004, of (ii) the Dow Jones Industrial Average (DJIA) from January 2, 1946 to August 18, 2004, of (iii) Standard and Poor's 500 index (SP500) from November 22, 1982 to August 18, 2004, and of (iii) the Financial Times Stock Exchange 100 index (FT 100) from April 2, 1984 to August 18, 2004. We divide the time series of each of these indices in the two periods: booms and stagnations, and investigate the statistical properties of absolute log returns, which is a typical measure of volatility, for each period. We find that (i) the tail of the distribution of the absolute log-returns is approximated by a power-law function with the exponent close to 3 in the periods of booms while the distribution is described by an exponential function with the scale parameter close to unity in the periods of stagnations.
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.:
- Parameswaran Gopikrishnan & Vasiliki Plerou & Luis A. Nunes Amaral & Martin Meyer & H. Eugene Stanley, 1999. "Scaling of the distribution of fluctuations of financial market indices," Papers cond-mat/9905305, arXiv.org.
- Pagan, Adrian, 1996. "The econometrics of financial markets," Journal of Empirical Finance, Elsevier, vol. 3(1), pages 15-102, May.
- Benoit Mandelbrot, 2015.
"The Variation of Certain Speculative Prices,"
World Scientific Book Chapters,in: THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 3, pages 39-78
World Scientific Publishing Co. Pte. Ltd..
- Benoit Mandelbrot, 1963. "The Variation of Certain Speculative Prices," The Journal of Business, University of Chicago Press, vol. 36, pages 394-394.
- Longin, Francois M, 1996. "The Asymptotic Distribution of Extreme Stock Market Returns," The Journal of Business, University of Chicago Press, vol. 69(3), pages 383-408, July.
- Kaizoji, Taisei, 2004. "Inflation and deflation in financial markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 343(C), pages 662-668.
- Michel M. Dacorogna, & Ulrich A. Muller & Olivier V. Pictet & Casper De Vries,, "undated". "The Distribution of Extremal Foreign Exchange Rate Returns in Extremely Large Data Sets," Working Papers 1992-10-22, Olsen and Associates.
- Richard B. Olsen & Ulrich A. Müller & Michel M. Dacorogna & Olivier V. Pictet & Rakhal R. Davé & Dominique M. Guillaume, 1997. "From the bird's eye to the microscope: A survey of new stylized facts of the intra-daily foreign exchange markets (*)," Finance and Stochastics, Springer, vol. 1(2), pages 95-129.
- Taisei Kaizoji & Michiyo Kaizoji, 2003. "Empirical Laws Of A Stock Price Index And A Stochastic Model," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 6(03), pages 303-312.
- 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. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:arx:papers:physics/0506114. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.