Browsing by Author "Fuentes, Miguel A."

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    Diversity emerging: from competitive exclusion to neutral coexistence in ecosystems
    (2011) Keymer, Juan E.; Fuentes, Miguel A.; Marquet Iturriaga, Pablo Ángel
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    Model for non-Gaussian intraday stock returns
    (2009) Gerig, Austin; Vicente, Javier; Fuentes, Miguel A.
    Stock prices are known to exhibit non-Gaussian dynamics, and there is much interest in understanding the origin of this behavior. Here, we present a model that explains the shape and scaling of the distribution of intraday stock price fluctuations (called intraday returns) and verify the model using a large database for several stocks traded on the London Stock Exchange. We provide evidence that the return distribution for these stocks is non-Gaussian and similar in shape and that the distribution appears stable over intraday time scales. We explain these results by assuming the volatility of returns is constant intraday but varies over longer periods such that its inverse square follows a gamma distribution. This produces returns that are Student distributed for intraday time scales. The predicted results show excellent agreement with the data for all stocks in our study and over all regions of the return distribution.
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    Universal Behavior of Extreme Price Movements in Stock Markets
    (2009) Fuentes, Miguel A.; Gerig, Austin; Vicente, Javier
    Many studies assume stock prices follow a random process known as geometric Brownian motion. Although approximately correct, this model fails to explain the frequent occurrence of extreme price movements, such as stock market crashes. Using a large collection of data from three different stock markets, we present evidence that a modification to the random model-adding a slow, but significant, fluctuation to the standard deviation of the process-accurately explains the probability of different-sized price changes, including the relative high frequency of extreme movements. Furthermore, we show that this process is similar across stocks so that their price fluctuations can be characterized by a single curve. Because the behavior of price fluctuations is rooted in the characteristics of volatility, we expect our results to bring increased interest to stochastic volatility models, and especially to those that can produce the properties of volatility reported here.