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Financial Volatility and Independent and Identically Distributed Variables

  • Annibal Figueiredo
  • Iram Gleria
  • Raul Matsushita
  • Sergio Da Silva

Given that financial series are poorly described by Gaussian distributions, how can the volatility behavior of such series be explained? Here we put forward a possible explanation to add the existing ones. We focus on a class of reduced variables that are independent and identically distributed. These variables together with an extra exponential law are able to explain the volatility of the intraday Brazilian real-US dollar exchange rate for the year 2002.

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File URL: http://econwpa.repec.org/eps/fin/papers/0407/0407011.pdf
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Paper provided by EconWPA in its series Finance with number 0407011.

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Date of creation: 16 Jul 2004
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Handle: RePEc:wpa:wuwpfi:0407011
Note: Type of Document - pdf
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Sergio Da Silva, 2004. "Levy Flights, Autocorrelation, and Slow Convergence," Finance 0405021, EconWPA.
  2. Andrew W. Lo, A. Craig MacKinlay, 1988. "Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 41-66.
  3. Yanhui Liu & Parameswaran Gopikrishnan & Pierre Cizeau & Martin Meyer & Chung-Kang Peng & H. Eugene Stanley, 1999. "The statistical properties of the volatility of price fluctuations," Papers cond-mat/9903369, arXiv.org, revised Mar 1999.
  4. Rafal Weron, 2003. "Levy-stable distributions revisited: tail index > 2 does not exclude the Levy-stable regime," Econometrics 0305003, EconWPA.
  5. Szymon Borak & Wolfgang Härdle & Rafal Weron, 2005. "Stable Distributions," SFB 649 Discussion Papers SFB649DP2005-008, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  6. Ding, Zhuanxin & Granger, Clive W. J. & Engle, Robert F., 1993. "A long memory property of stock market returns and a new model," Journal of Empirical Finance, Elsevier, vol. 1(1), pages 83-106, June.
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