A second-order stock market model
Statistical Finance
2013-02-18 v1 Probability
Abstract
A first-order model for a stock market assigns to each stock a return parameter and a variance parameter that depend only on the rank of the stock. A second-order model assigns these parameters based on both the rank and the name of the stock. First- and second-order models exhibit stability properties that make them appropriate as a backdrop for the analysis of the idiosyncratic behavior of individual stocks. Methods for the estimation of the parameters of second-order models are developed in this paper.
Keywords
Cite
@article{arxiv.1302.3870,
title = {A second-order stock market model},
author = {Robert Fernholz and Tomoyuki Ichiba and Ioannis Karatzas},
journal= {arXiv preprint arXiv:1302.3870},
year = {2013}
}
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15 pages