Inverse Statistics in Economics: The gain-loss asymmetry

Mogens H. Jensen, Anders Johansen and Ingve Simonsen

Papers from arXiv.org

Abstract: Inverse statistics in economics is considered. We argue that the natural candidate for such statistics is the investment horizons distribution. This distribution of waiting times needed to achieve a predefined level of return is obtained from (often detrended) historic asset prices. Such a distribution typically goes through a maximum at a time called the {\em optimal investment horizon}, $\tau^*_\rho$, since this defines the most likely waiting time for obtaining a given return $\rho$. By considering equal positive and negative levels of return, we report on a quantitative gain-loss asymmetry most pronounced for short horizons. It is argued that this asymmetry reflects the market dynamics and we speculate over the origin of this asymmetry.

Date: 2002-11
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Citations: View citations in EconPapers (2)

Published in Physica A 324, 338 (2003).

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:cond-mat/0211039

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