Universität zu Köln

Wergen, Gregor (2014). Modeling record-breaking stock prices. Physica A, 396. S. 114 - 134. AMSTERDAM: ELSEVIER. ISSN 1873-2119

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Abstract

We study the statistics of record-breaking events in daily stock prices of 366 stocks from the Standard and Poor's 500 stock index. Both the record events in the daily stock prices themselves and the records in the daily returns are discussed. In both cases we try to describe the record statistics of the stock data with simple theoretical models. The daily returns are compared to i.i.d. RVs and the stock prices are modeled using a biased random walk, for which the record statistics are known. These models agree partly with the behavior of the stock data, but we also identify several interesting deviations. Most importantly, the number of records in the stocks appears to be systematically decreased in comparison with the random walk model. Considering the autoregressive AR(1) process, we can predict the record statistics of the daily stock prices more accurately. We also compare the stock data with simulations of the record statistics of the more complicated GARCH(1, 1) model, which, in combination with the AR(1) model, gives the best agreement with the observational data. To better understand our findings, we discuss the survival and first-passage times of stock prices on certain intervals and analyze the correlations between the individual record events. After recapitulating some recent results for the record statistics of ensembles of N stocks, we also present some new observations for the weekly distributions of record events. (C) 2013 Elsevier B.V. All rights reserved.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Wergen, Gregor UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-445844
DOI:	10.1016/j.physa.2013.11.001
Journal or Publication Title:	Physica A
Volume:	396
Page Range:	S. 114 - 134
Date:	2014
Publisher:	ELSEVIER
Place of Publication:	AMSTERDAM
ISSN:	1873-2119
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language MARKET; FLUCTUATIONS; STATISTICS; BEHAVIOR; TIME Multiple languages Physics, Multidisciplinary Multiple languages
URI:	http://kups.ub.uni-koeln.de/id/eprint/44584