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On the gap between an empirical distribution and an exponential distribution of waiting times for price changes in a financial market

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  • Naoya Sazuka

Abstract

We analyze waiting times for price changes in a foreign currency exchange rate. Recent empirical studies of high frequency financial data support that trades in financial markets do not follow a Poisson process and the waiting times between trades are not exponentially distributed. Here we show that our data is well approximated by a Weibull distribution rather than an exponential distribution in a non-asymptotic regime. Moreover, we quantitatively evaluate how much an empirical data is far from an exponential distribution using a Weibull fit. Finally, we discuss a phase transition between a Weibull-law and a power-law in the asymptotic long waiting time regime.

Suggested Citation

  • Naoya Sazuka, 2006. "On the gap between an empirical distribution and an exponential distribution of waiting times for price changes in a financial market," Papers physics/0606005, arXiv.org.
    • Handle: RePEc:arx:papers:physics/0606005
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