Probability of Large Movements in Financial Markets

Robert Kitt, Maksim Sakki and Jaan Kalda

Papers from arXiv.org

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 multiscaling power law.

Date: 2008-12, Revised 2009-09
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Published in Physica A 388 (2009) 4838-4844

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:0812.4455

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