Probability of large movements in financial markets

Robert Kitt, Maksim Säkki and Jaan Kalda

Physica A: Statistical Mechanics and its Applications, 2009, vol. 388, issue 23, 4838-4844

Abstract: Based on empirical financial time series, we show that the “silence-breaking” probability follows a super-universal power law: the probability of observing a large movement is inversely proportional to the length of the on-going low-variability period. Such a scaling law has been previously predicted theoretically [R. Kitt, J. Kalda, Physica A 353 (2005) 480], assuming that the length-distribution of the low-variability periods follows a multi-scaling power law.

Keywords: Econophysics; Multi-scaling; Low-variability periods (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:388:y:2009:i:23:p:4838-4844

DOI: 10.1016/j.physa.2009.07.027

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