THE DISTRIBUTION OF RETURNS OF STOCK PRICES

Luís A. N. Amaral (), Vasiliki Plerou, Parameswaran Gopikrishnan, Martin Meyer and H. Eugene Stanley
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Luís A. N. Amaral: Center for Polymer Studies and Department of Physics, Boston University, Boston, MA 02215, USA
Vasiliki Plerou: Center for Polymer Studies and Department of Physics, Boston University, Boston, MA 02215, USA
Parameswaran Gopikrishnan: Center for Polymer Studies and Department of Physics, Boston University, Boston, MA 02215, USA
Martin Meyer: Center for Polymer Studies and Department of Physics, Boston University, Boston, MA 02215, USA
H. Eugene Stanley: Center for Polymer Studies and Department of Physics, Boston University, Boston, MA 02215, USA

International Journal of Theoretical and Applied Finance (IJTAF), 2000, vol. 03, issue 03, 365-369

Abstract: We perform a phenomenological study of stock price fluctuations of individual companies. We systematically analyze two different databases covering securities from the three major US stock markets. We consider (i) the trades and quotes (TAQ) database, for which we analyze 40 million records for 1000 US companies for the 2-year period 1994–95, and (ii) the Center for Research and Security Prices (CRSP) database, for which we analyze 35 million daily records for approximately 16,000 companies in the 35-year period 1962–96. We study the probability distribution of returns over varying time scales — from 5 min up to 4 years. For time scales from 5 min up to approximately 16 days, we find that the tails of the distributions can be well described by a power-law decay, characterized by an exponentα ≈ 3— well outside the stable Lévy regime0

Keywords: Scaling; distribution; power-laws; returns; Lévy; stock prices (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (10)

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DOI: 10.1142/S0219024900000218

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