Inverse statistics in economics: the gain–loss asymmetry

Mogens H. Jensen, Anders Johansen and Ingve Simonsen

Physica A: Statistical Mechanics and its Applications, 2003, vol. 324, issue 1, 338-343

Abstract: Inverse statistics in economics is considered. We argue that the natural candidate for such statistics is the investment horizons distribution. This distribution of waiting times needed to achieve a predefined level of return is obtained from (often detrended) historic asset prices. Such a distribution typically goes through a maximum at a time called the optimal investment horizon, τρ∗, since this defines the most likely waiting time for obtaining a given return ρ. By considering equal positive and negative levels of return, we report on a quantitative gain–loss asymmetry most pronounced for short horizons. It is argued that this asymmetry reflects the market dynamics and we speculate over the origin of this asymmetry.

Keywords: Econophysics; Fractional statistics; Statistical physics; Wavelet transform (search for similar items in EconPapers)
Date: 2003
References: View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:324:y:2003:i:1:p:338-343

DOI: 10.1016/S0378-4371(02)01884-8

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