Stock market context of the Lévy walks with varying velocity

Ryszard Kutner

Physica A: Statistical Mechanics and its Applications, 2002, vol. 314, issue 1, 786-795

Abstract: We developed the most general Lévy walks with varying velocity, shorter called the Weierstrass walks (WW) model, by which one can describe both stationary and non-stationary stochastic time series. We considered a non-Brownian random walk where the walker moves, in general, with a velocity that assumes a different constant value between the successive turning points, i.e., the velocity is a piecewise constant function. This model is a kind of Lévy walks where we assume a hierarchical, self-similar in a stochastic sense, spatio-temporal representation of the main quantities such as waiting-time distribution and sojourn probability density (which are principal quantities in the continuous-time random walk formalism). The WW model makes possible to analyze both the structure of the Hurst exponent and the power-law behavior of kurtosis. This structure results from the hierarchical, spatio-temporal coupling between the walker displacement and the corresponding time of the walks. The analysis uses both the fractional diffusion and the super Burnett coefficients. We constructed the diffusion phase diagram which distinguishes regions occupied by classes of different universality. We study only such classes which are characteristic for stationary situations. We thus have a model ready for describing the data presented, e.g., in the form of moving averages; the operation is often used for stochastic time series, especially financial ones. The model was inspired by properties of financial time series and tested for empirical data extracted from the Warsaw stock exchange since it offers an opportunity to study in an unbiased way several features of stock exchange in its early stage.

Keywords: Lévy walks; Lévy walks with varying velocity; Weierstrass walks; Fractional random walk; Anomalous diffusion; Hierarchical stochastic spatio-temporal coupling; Dynamic diffusion coefficient; Super Burnett coefficient; Hurst exponent; Kurtosis; Diffusion phase diagram; Moving-average (search for similar items in EconPapers)
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:314:y:2002:i:1:p:786-795

DOI: 10.1016/S0378-4371(02)01058-0

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