A model for stock market returns: non-Gaussian fluctuations and financial factors |
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Authors: | B D Craven Sardar M N Islam |
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Institution: | (1) Department of Mathematics & Statistics, University of Melbourne, Melbourne, VIC, 3010, Australia;(2) Victoria University, Melbourne, VIC, Australia |
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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.
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Keywords: | Aggregate stock prices Returns Diflogs Positive feedback Phases Kurtosis Optimism factor Credit |
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