From short to fat tails in financial markets: a unified description

A. A.G. Cortines (), R. Riera () and C. Anteneodo ()

The European Physical Journal B: Condensed Matter and Complex Systems, 2007, vol. 60, issue 3, 385-389

Abstract: In complex systems such as turbulent flows and financial markets, the dynamics in long and short time-lags, signaled by Gaussian and fat-tailed statistics, respectively, calls for a unified description. To address this issue we analyze a real dataset, namely, price fluctuations, in a wide range of temporal scales to embrace both regimes. By means of Kramers-Moyal (KM) coefficients evaluated from empirical time series, we obtain the evolution equation for the probability density function (PDF) of price returns. We also present consistent asymptotic solutions for the timescale dependent equation that emerges from the empirical analysis. From these solutions, new relationships connecting PDF characteristics, such as tail exponents, to parameters of KM coefficients arise. The results reveal a dynamical path that leads from Gaussian to fat-tailed statistics, furnishing insights on other complex systems where akin crossover is observed. Copyright EDP Sciences/Società Italiana di Fisica/Springer-Verlag 2007

Keywords: 05.10.Gg Stochastic analysis methods (Fokker-Planck, Langevin, etc.), 05.40.-a Fluctuation phenomena, random processes, noise, and Brownian motion, 89.65.Gh Economics; econophysics, financial markets, business and management, (search for similar items in EconPapers)
Date: 2007
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1140/epjb/e2007-00360-7 (text/html)
Access to full text is restricted to subscribers.

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:spr:eurphb:v:60:y:2007:i:3:p:385-389

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/10051

DOI: 10.1140/epjb/e2007-00360-7

Access Statistics for this article

The European Physical Journal B: Condensed Matter and Complex Systems is currently edited by P. Hänggi and Angel Rubio

More articles in The European Physical Journal B: Condensed Matter and Complex Systems from Springer, EDP Sciences
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().