Title | Stochastic volatility of financial markets as the fluctuating rate of trading: An empirical study |
Publication Type | Journal Article |
Year of Publication | 2007 |
Authors | C. A. Silva, and V. M. Yakovenko |
Journal | Physica A: Statistical Mechanics and its Applications |
Volume | 382 |
Pagination | 278–285 |
Date Published | aug |
ISSN | 03784371 |
Keywords | 2007, Single Fellow |
Abstract | We present an empirical study of the subordination hypothesis for a stochastic time series of a stock price. The fluctuating rate of trading is identified with the stochastic variance of the stock price, as in the continuous-time random walk (CTRW) framework. The probability distribution of the stock price changes (log-returns) for a given number of trades N is found to be approximately Gaussian. The probability distribution of N for a given time interval Dt is non-Poissonian and has an exponential tail for large N and a sharp cutoff for small N. Combining these two distributions produces a nontrivial distribution of log-returns for a given time interval Dt, which has exponential tails and a Gaussian central part, in agreement with empirical observations. |
URL | http://arxiv.org/abs/physics/0608299 |