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Defining an intrinsic "stickiness" parameter of stock price returns

Author

Listed:
  • Naji Massad

    (Centre d'Economie de la Sorbonne
    https://centredeconomiesorbonne.univ-paris1.fr)

  • Jørgen Vitting Andersen

    (Centre d'Economie de la Sorbonne
    https://centredeconomiesorbonne.univ-paris1.fr)

Abstract

We introduce a non-linear pricing model of individual stock returns that defines a "stickiness" parameter of the returns. The pricing model resembles the capital asset pricing model (CAPM) used in finance but has a non-linear component inspired from models of earth quake tectonic plate movements. The link to tectonic plate movements happens, since price movements of a given stock index is seen adding "stress" to its components of individual stock returns, in order to follow the index. How closely individual stocks follow the index's price movements, can then be used to define their "stickiness"

Suggested Citation

  • Naji Massad & Jørgen Vitting Andersen, 2019. "Defining an intrinsic "stickiness" parameter of stock price returns," Documents de travail du Centre d'Economie de la Sorbonne 19028, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    • Handle: RePEc:mse:cesdoc:19028
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    Keywords

    non-linear CAPM; stickiness of stock returns;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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