Optimal Investment Horizons for Stocks and Markets

A. Johansen, I. Simonsen and M. H. Jensen

Papers from arXiv.org

Abstract: The inverse statistics is the distribution of waiting times needed to achieve a predefined level of return obtained from (detrended) historic asset prices \cite{optihori,gainloss}. Such a distribution typically goes through a maximum at a time coined the {\em optimal investment horizon}, $\tau^*_\rho$, which defines the most likely waiting time for obtaining a given return $\rho$. By considering equal positive and negative levels of return, we reported in \cite{gainloss} on a quantitative gain/loss asymmetry most pronounced for short horizons. In the present paper, the inverse statistics for 2/3 of the individual stocks presently in the DJIA is investigated. We show that this gain/loss asymmetry established for the DJIA surprisingly is {\em not} present in the time series of the individual stocks nor their average. This observation points towards some kind of collective movement of the stocks of the index (synchronization).

Date: 2006-01
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://arxiv.org/pdf/physics/0601002 Latest version (application/pdf)

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:arx:papers:physics/0601002

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators (help@arxiv.org).