Comparison between the probability distribution of returns in the Heston model and empirical data for stock indexes

A.Christian Silva and Victor Yakovenko

Physica A: Statistical Mechanics and its Applications, 2003, vol. 324, issue 1, 303-310

Abstract: We compare the probability distribution of returns for the three major stock-market indexes (Nasdaq, S&P500, and Dow-Jones) with an analytical formula recently derived by Drăgulescu and Yakovenko for the Heston model with stochastic variance. For the period of 1982–1999, we find a very good agreement between the theory and the data for a wide range of time lags from 1 to 250 days. On the other hand, deviations start to appear when the data for 2000–2002 are included. We interpret this as a statistical evidence of the major change in the market from a positive growth rate in 1980s and 1990s to a negative rate in 2000s.

Keywords: Econophysics; Stochastic volatility; Heston; Stock-market returns (search for similar items in EconPapers)
Date: 2003
References: View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437102019039
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:324:y:2003:i:1:p:303-310

DOI: 10.1016/S0378-4371(02)01903-9

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().