dorsal/arxiv
View SchemaInverse Statistics for Stocks and Markets
| Authors | A. Johansen, I. Simonsen, M. H. Jensen |
|---|---|
| Categories | |
| ArXiv ID | physics/0511091 |
| URL | https://arxiv.org/abs/physics/0511091 |
Abstract
In recent publications, the authors have considered inverse statistics of the Dow Jones Industrial Averaged (DJIA) [1-3]. Specifically, we argued that the natural candidate for such statistics is the investment horizons distribution. This is the distribution of waiting times needed to achieve a predefined level of return obtained from detrended historic asset prices. Such a distribution typically goes through a maximum at a time coined the {\em optimal investment horizon}, $\tau^*_\rho$, which defines the most likely waiting time for obtaining a given return $\rho$. By considering equal positive and negative levels of return, we reported in [2,3] on a quantitative gain/loss asymmetry most pronounced for short horizons. In the present paper, this gain/loss asymmetry is re-visited for 2/3 of the individual stocks presently in the DJIA. We show that this gain/loss asymmetry established for the DJIA surprisingly is {\em not} present in the time series of the individual stocks. The most reasonable explanation for this fact is that the gain/loss asymmetry observed in the DJIA as well as in the SP500 and Nasdaq are due to movements in the market as a whole, {\it i.e.}, cooperative cascade processes (or ``synchronization'') which disappear in the inverse statistics of the individual stocks.
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"abstract": "In recent publications, the authors have considered inverse statistics of the\nDow Jones Industrial Averaged (DJIA) [1-3]. Specifically, we argued that the\nnatural candidate for such statistics is the investment horizons distribution.\nThis is the distribution of waiting times needed to achieve a predefined level\nof return obtained from detrended historic asset prices. Such a distribution\ntypically goes through a maximum at a time coined the {\\em optimal investment\nhorizon}, $\\tau^*_\\rho$, which defines the most likely waiting time for\nobtaining a given return $\\rho$. By considering equal positive and negative\nlevels of return, we reported in [2,3] on a quantitative gain/loss asymmetry\nmost pronounced for short horizons. In the present paper, this gain/loss\nasymmetry is re-visited for 2/3 of the individual stocks presently in the DJIA.\nWe show that this gain/loss asymmetry established for the DJIA surprisingly is\n{\\em not} present in the time series of the individual stocks. The most\nreasonable explanation for this fact is that the gain/loss asymmetry observed\nin the DJIA as well as in the SP500 and Nasdaq are due to movements in the\nmarket as a whole, {\\it i.e.}, cooperative cascade processes (or\n``synchronization\u0027\u0027) which disappear in the inverse statistics of the\nindividual stocks.",
"arxiv_id": "physics/0511091",
"authors": [
"A. Johansen",
"I. Simonsen",
"M. H. Jensen"
],
"categories": [
"physics.soc-ph",
"cond-mat.stat-mech",
"physics.data-an",
"q-fin.ST"
],
"title": "Inverse Statistics for Stocks and Markets",
"url": "https://arxiv.org/abs/physics/0511091"
},
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