A model for stock market returns: non-Gaussian fluctuations and financial factors

A model for stock market returns: non-Gaussian fluctuations and financial factors While there are various theories to account for the large variations in stock prices, some observed statistical aspects require further analysis. A model is proposed for aggregate stock prices, based on observed data, rather than any efficient market hypothesis, and considering jumps in statistical parameters between phases of generally increasing, or generally decreasing, aggregate stock prices. The model relates a critical parameter for short-term behaviour directly to financial factors, especially interest rates, to explain large short-term variations which follow a non-Gaussian distribution. Economic fundamentals may affect changes over longer periods. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

A model for stock market returns: non-Gaussian fluctuations and financial factors

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Publisher
Springer US
Copyright
Copyright © 2007 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-007-0066-3
Publisher site
See Article on Publisher Site

Abstract

While there are various theories to account for the large variations in stock prices, some observed statistical aspects require further analysis. A model is proposed for aggregate stock prices, based on observed data, rather than any efficient market hypothesis, and considering jumps in statistical parameters between phases of generally increasing, or generally decreasing, aggregate stock prices. The model relates a critical parameter for short-term behaviour directly to financial factors, especially interest rates, to explain large short-term variations which follow a non-Gaussian distribution. Economic fundamentals may affect changes over longer periods.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Oct 20, 2007

References

  • Positive feedback investment strategies and destabilizing rational speculation
    Bradford de Long, J; Schleifer, A; Summers, LH; Waldmann, RJ

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