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Inverse cubic law for the distribution of stock price variations

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Abstract:

The probability distribution of stock price changes is studied by analyzing a database (the Trades and Quotes Database) documenting every trade for all stocks in three major US stock markets, for the two year period January 1994 - December 1995. A sample of 40 million data points is extracted, which is substantially larger than studied hitherto. We find an asymptotic power-law behavior for the cumulative distribution with an exponent \(a \approx 3\), well outside the Lévy regime \((0 < \alpha < 2)\).

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Authors and Affiliations

  1. Center for Polymer Studies and Department of Physics, Boston University Boston, 02215, MA, USA

    P. Gopikrishnan, M. Meyer, L.A.N. Amaral & H.E. Stanley

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  1. P. Gopikrishnan
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  2. M. Meyer
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  3. L.A.N. Amaral
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  4. H.E. Stanley
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Received: 23 April 1998 / Revised and Accepted: 24 April 1998

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Gopikrishnan, P., Meyer, M., Amaral, L. et al. Inverse cubic law for the distribution of stock price variations. Eur. Phys. J. B 3, 139–140 (1998). https://doi.org/10.1007/s100510050292

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  • DOI: https://doi.org/10.1007/s100510050292

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