Probability of Large Movements in Financial Markets

Details Probability of Large Movements in Financial Markets Probability of Large Movements in Financial Markets

2008-12-24

arxiv.org/abs/0812.4455v2

Physica A 388 (2009) 4838-4844

Economy

Quantitative Finance

Statistical Finance

8 pages, 5 figures

Scientific paper

10.1016/j.physa.2009.07.027

Based on empirical financial time-series, we show that the "silence-breaking" probability follows a super-universal power law: the probability of observing a large movement is inversely proportional to the length of the on-going low-variability period. Such a scaling law has been previously predicted theoretically [R. Kitt, J. Kalda, Physica A 353 (2005) 480], assuming that the length-distribution of the low-variability periods follows a multiscaling power law.

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