Transition from lognormal to χ2-superstatistics for financial time series

Dan Xu and Christian Beck

Physica A: Statistical Mechanics and its Applications, 2016, vol. 453, issue C, 173-183

Abstract: Share price returns on different time scales can be well modelled by a superstatistical dynamics. Here we provide an investigation which type of superstatistics is most suitable to properly describe share price dynamics on various time scales. It is shown that while χ2-superstatistics works well on a time scale of days, on a much smaller time scale of minutes the price changes are better described by lognormal superstatistics. The system dynamics thus exhibits a transition from lognormal to χ2 superstatistics as a function of time scale. We discuss a more general model interpolating between both statistics which fits the observed data very well. We also present results on correlation functions of the extracted superstatistical volatility parameter, which exhibits exponential decay for returns on large time scales, whereas for returns on small time scales there are long-range correlations and power-law decay.

Keywords: Superstatistics; Volatility fluctuations; Share price returns (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:453:y:2016:i:c:p:173-183

DOI: 10.1016/j.physa.2016.02.057

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