The origin of fat-tailed distributions in financial time series

G.M. Viswanathan, U.L. Fulco, M.L. Lyra and M. Serva

Physica A: Statistical Mechanics and its Applications, 2003, vol. 329, issue 1, 273-280

Abstract: A classic problem in physics is the origin of fat-tailed distributions generated by complex systems. We study the distributions of stock returns measured over different time lags τ. We find that destroying all correlations without changing the τ=1d distribution, by shuffling the order of the daily returns, causes the fat tails to almost vanish for τ>1d. We argue that the fat tails are caused by the well-known long-range volatility correlations that have already been systematically studied previously. Indeed, destroying only sign correlations, by shuffling the order of only the signs (but not the absolute values) of the daily returns, allows the fat tails to persist for τ>1d.

Keywords: Econophysics; Stock returns; Long-range correlations (search for similar items in EconPapers)
Date: 2003
References: View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437103006083
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:329:y:2003:i:1:p:273-280

DOI: 10.1016/S0378-4371(03)00608-3

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().