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Quantifying stock return distributions in financial markets
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Botta, Federico, Moat, Helen Susannah, Stanley, H. Eugene and Preis, Tobias (2015) Quantifying stock return distributions in financial markets. PLoS One, 10 (9). pp. 1-10. e0135600. doi:10.1371/journal.pone.0135600
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Official URL: http://dx.doi.org/10.1371/journal.pone.0135600
Abstract
Being able to quantify the probability of large price changes in stock markets is of crucial importance in understanding financial crises that affect the lives of people worldwide. Large changes in stock market prices can arise abruptly, within a matter of minutes, or develop across much longer time scales. Here, we analyze a dataset comprising the stocks forming the Dow Jones Industrial Average at a second by second resolution in the period from January 2008 to July 2010 in order to quantify the distribution of changes in market prices at a range of time scales. We find that the tails of the distributions of logarithmic price changes, or returns, exhibit power law decays for time scales ranging from 300 seconds to 3600 seconds. For larger time scales, we find that the distributions tails exhibit exponential decay. Our findings may inform the development of models of market behavior across varying time scales.
| Item Type: | Journal Article | ||||||||
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| Subjects: | H Social Sciences > HG Finance | ||||||||
| Divisions: | Faculty of Social Sciences > Warwick Business School > Behavioural Science Faculty of Social Sciences > Warwick Business School |
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| Library of Congress Subject Headings (LCSH): | Stocks -- Rate of return | ||||||||
| Journal or Publication Title: | PLoS One | ||||||||
| Publisher: | Public Library of Science | ||||||||
| ISSN: | 1932-6203 | ||||||||
| Official Date: | 1 September 2015 | ||||||||
| Dates: |
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| Date of first compliant deposit: | 11 December 2015 | ||||||||
| Volume: | 10 | ||||||||
| Number: | 9 | ||||||||
| Number of Pages: | 10 | ||||||||
| Page Range: | pp. 1-10 | ||||||||
| Article Number: | e0135600 | ||||||||
| DOI: | 10.1371/journal.pone.0135600 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Open Access | ||||||||
| Funder: | Research Councils UK (RCUK), Engineering and Physical Sciences Research Council (EPSRC), National Science Foundation (U.S.) (NSF) | ||||||||
| Grant number: | EP/K039830/1 (RCUK), EP/E501311/1 (EPSRC), 1411158 (NSF), 1452061 (NSF) |
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