Statistical Analysis of Data from the Stock Market

  • Fred Espen Benth
Part of the Universitext book series (UTX)


Black & Scholes assumed in their seminal work [9] that the returns from the underlying stock are normally distributed. The main part of this chapter will be devoted to testing this normal hypothesis on the distribution of observed stock returns. Our purpose is to highlight the basic assumptions and emphasize the limitations of their model. We will also go into other aspect of the stochastic dynamics of the underlying stock. On the way we shall introduce Brownian motion and Lévy; processes, as well as some powerful statistical distributions to model stocks returns. This chapter will demonstrate the typical problems one is dealing with in empirical finance.


Brownian Motion Stock Price Geometric Brownian Motion Scholes Model Simulated Path 
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Copyright information

© Springer-Verlag Berlin Heidelberg 2004

Authors and Affiliations

  • Fred Espen Benth
    • 1
  1. 1.Department of MathematicsCentre of Mathematics for Applications University of OsloOsloNorway

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