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Scaling, stability and distribution of the high-frequency returns of the IBEX35 index

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Suarez García, Pablo and Gómez-Ullate Otaiza, David (2013) Scaling, stability and distribution of the high-frequency returns of the IBEX35 index. Physica A: statistical mechanics and its applications, 392 (6). pp. 1409-1417. ISSN 0378-4371

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Official URL: http://dx.doi.org/10.1016/j.physa.2012.11.026




Abstract

In this paper we perform a statistical analysis of the high-frequency returns of the IBEX35 Madrid stock exchange index. We find that its probability distribution seems to be stable over different time scales, a stylized fact observed in many different financial time series. However, an in-depth analysis of the data using maximum likelihood estimation and different goodness-of-fit tests rejects the Levy-stable law as a plausible underlying probabilistic model. The analysis shows that the Normal Inverse Gaussian distribution provides an overall fit for the data better than any of the other subclasses of the family of Generalized Hyperbolic distributions and certainly much better than the Levy-stable laws. Furthermore, the right (resp. left) tail of the distribution seems to follow a power-law with exponent alpha approximate to 4.60 (resp. alpha approximate to 4.28). Finally, we present evidence that the observed stability is due to temporal correlations or non-stationarities of the data.


Item Type:Article
Additional Information:

© 2012 Elsevier B.V.
The research of DGU has been supported in part by Direccion General de Investigacion, Ministerio de Ciencia e Innovacion of Spain, under grants MTM2009-06973 and MTM2012-31714

Uncontrolled Keywords:Price fluctuations; Tail thickness; Stock returns; Market; Parameters; Critique; Behavior; Alpha; Law
Subjects:Sciences > Physics > Physics-Mathematical models
Sciences > Physics > Mathematical physics
ID Code:30773
Deposited On:11 Jun 2015 10:05
Last Modified:10 Dec 2018 15:09

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