The Volatility in a Multi-share Financial Market Model

Details The Volatility in a Multi-share Financial Market Model The Volatility in a Multi-share Financial Market Model

2000-12-16

arxiv.org/abs/cond-mat/0012309v1

Physics

Condensed Matter

4 pages, 3 eps figures (in text). Proceedings of Applications of Physics in Financial Analysis 2, Liege, Belgium, (July 2000).

Scientific paper

10.1007/s100510170241

Single index financial market models cannot account for the empirically observed complex interactions between shares in a market. We describe a multi-share financial market model and compare characteristics of the volatility, that is the standard deviation of the price fluctuations, with empirical characteristics. In particular we find its probability distribution is similar to a log normal distribution but with a long power-law tail for the large fluctuations, and that the time development shows superdiffusion. Both these results are in good quantitative agreement with observations.

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