Abstract–Risk and Price Distributions

Allen A. Abrahamson and John T. Emery

Journal of Financial and Quantitative Analysis, 1974, vol. 9, issue 5, 847-847

Abstract: While a substantial body of evidence exists indicating that the distribution of price changes in speculative markets is not normally distributed, there is some question about which theoretical distribution best describes price changes. This paper derives and tests an alternative distribution based on the incorporation of vectors of information bits into prices. The resultant distribution uses two parameters, u and β, to measure the response of price lags to given information vectors and can be interpreted as measures of risk.

Date: 1974
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