A second-order stock market model

Robert Fernholz, Tomoyuki Ichiba () and Ioannis Karatzas

Annals of Finance, 2013, vol. 9, issue 3, 439-454

Abstract: A first-order model for a stock market assigns to each stock a return parameter and a variance parameter that depend only on the rank of the stock. A second-order model assigns these parameters based on both the rank and the name of the stock. First- and second-order models exhibit stability properties that make them appropriate as a backdrop for the analysis of the idiosyncratic behavior of individual stocks. Methods for the estimation of the parameters of second-order models are developed in this paper. Copyright Springer-Verlag 2013

Keywords: Stochastic portfolio theory; Atlas model; First-order model; Second-order model; G10 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (10)

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DOI: 10.1007/s10436-012-0193-2

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