PMID: 15244787Jul 13, 2004Paper

Dynamics of stock prices

Physical Review. E, Statistical, Nonlinear, and Soft Matter Physics
Rosario Bartiromo

Abstract

We show that the dynamics of stock prices can be accurately described as a continuous time random walk with a time dependent diffusion coefficient. The time evolution of the diffusion coefficient can be derived from tick by tick databases provided the stock price is characterized in terms of a couple of values describing the best ask and the best bid. We are then led to a finding and, namely, that the transition rate of the random walk process is different from the frequency of transactions. Our results allow us to obtain a fast and reliable determination of the diffusion coefficient and precisely confirm that fat tails in the distribution of price variations are due to volatility fluctuations.

References

Jan 9, 1995·Physical Review Letters· Cowell Senft D, G Ehrlich
Apr 24, 2002·Physical Review. E, Statistical Physics, Plasmas, Fluids, and Related Interdisciplinary Topics·P GopikrishnanH E Stanley
Apr 24, 2002·Physical Review. E, Statistical Physics, Plasmas, Fluids, and Related Interdisciplinary Topics·V PlerouH E Stanley
Nov 22, 2002·Physical Review. E, Statistical, Nonlinear, and Soft Matter Physics·Kaushik MatiaH Eugene Stanley
Mar 15, 2003·Physical Review. E, Statistical, Nonlinear, and Soft Matter Physics·Jaume MasoliverGeorge H Weiss

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Citations

Sep 11, 2019·Reports on Progress in Physics·Zhi-Qiang JiangDidier Sornette

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