6533b86dfe1ef96bd12c9f3d
RESEARCH PRODUCT
Scaling and data collapse for the mean exit time of asset prices
Miquel MonteroJosep PerellóFabrizio LilloFabrizio LilloSalvatore MiccichèJaume MasoliverRosario N. Mantegnasubject
Physics - Physics and SocietyFísica matemàticaFOS: Physical sciencesMarkov processPhysics and Society (physics.soc-ph)FOS: Economics and businessFINANCEsymbols.namesakeFRACTIONAL CALCULUSQuadratic equationEconometricsNonlinear systemsApplied mathematicsDISTRIBUTIONSTime seriesScalingBrownian motionMathematicsStatistical hypothesis testingRANDOM-WALKSStatistical Finance (q-fin.ST)Series (mathematics)Markov chainStochastic processSistemes no linealsPhysicsAutocorrelationQuantitative Finance - Statistical FinanceFísicaFLUCTUATIONSMathematical physicssymbolsContinuous-time random walkdescription
We study theoretical and empirical aspects of the mean exit time of financial time series. The theoretical modeling is done within the framework of continuous time random walk. We empirically verify that the mean exit time follows a quadratic scaling law and it has associated a pre-factor which is specific to the analyzed stock. We perform a series of statistical tests to determine which kind of correlation are responsible for this specificity. The main contribution is associated with the autocorrelation property of stock returns. We introduce and solve analytically both a two-state and a three-state Markov chain models. The analytical results obtained with the two-state Markov chain model allows us to obtain a data collapse of the 20 measured MET profiles in a single master curve.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2005-07-06 |