Model for non-Gaussian intraday stock returns

Model for non-Gaussian intraday stock returns.

Stock prices are known to exhibit non-Gaussian dynamics, and there is much interest in understanding the origin of this behavior. Here, we present a model that explains the shape and scaling of the distribution of intraday stock price fluctuations (called intraday returns) and verify the model using a large database for several stocks traded on the London Stock Exchange. We provide evidence tha...

A Multi-Time Scale Non-Gaussian Model of Stock Returns

We propose a stochastic process for stock movements that, with just one source of Brownian noise, has an instantaneous volatility that rises from a type of statistical feedback across many time scales. This results in a stationary non-Gaussian process which captures many features observed in time series of real stock returns. These include volatility clustering, a kurtosis which decreases slowl...

Does quoted depth predict intraday stock returns?: theory and evidence

We generate and test new implications of Kavajecz’s (1996a) market microstructure model for cross-sectional variation in intraday expected stock returns. In this model, the specialist presents a price schedule consisting of bid and ask prices and a bid and ask size. We document that in his model, the specialist reveals through the bid-ask size spread what she believes to be the expected return ...

Correlations of extreme stock returns within a non-Gaussian one-factor model

It is commonly believed that the correlations between stock returns increase in high volatility periods. We investigate how much of these correlations can be explained using conditional averages within a simple onefactor description. Using surrogate data with the true market return as the dominant factor, we show that most of these correlations can be accounted for. However, more subtle effects...

A Simple Non-Stationary Model for Stock Returns