IDEAS home Printed from https://ideas.repec.org/p/arx/papers/physics-0511129.html
   My bibliography  Save this paper

Description of dynamics of stock prices by a Langevin approach

Author

Listed:
  • Zi-Gang Huang
  • Yong Chen
  • Yong Zhang
  • Ying-Hai Wang

Abstract

We present a time-dependent Langevin description of dynamics of stock prices. Based on a simple sliding-window algorithm, the fluctuation of stock prices is discussed in the view of a time-dependent linear restoring force which is the linear approximation of the drift parameter in Langevin equation estimated from the financial time series. By choosing suitable weighted factor for the linear approximation, the relation between the dynamical effect of restoring force and the autocorrelation of the financial time series is deduced. We especially analyze the daily log-returns of S$&$P 500 index from 1950 to 1999. The significance of the restoring force towards the prices evolution are investigated from its two coefficients, slope coefficient and equilibrium position. The new simple form of the restoring force obtained both from statistical and theoretical analyses suggests that the Langevin approach can effectively present the macroscopical and the detail properties of the price evolution.

Suggested Citation

  • Zi-Gang Huang & Yong Chen & Yong Zhang & Ying-Hai Wang, 2005. "Description of dynamics of stock prices by a Langevin approach," Papers physics/0511129, arXiv.org.
    • Handle: RePEc:arx:papers:physics/0511129
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/physics/0511129
    File Function: Latest version
    Download Restriction: no
    ---><---

    More about this item

    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:arx:papers:physics/0511129. 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: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    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.