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    The fine structure of asset returns: an empirical investigation

    Carr, P. and Geman, Hélyette and Madan, D.B. and Yor, M. (2002) The fine structure of asset returns: an empirical investigation. Journal of Business 75 (2), pp. 305-332. ISSN 0021-9398.

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    Abstract

    We investigate the importance of diffusion and jumps in a new model for asset returns. In contrast to standard models, we allow for jump components displaying finite or infinite activity and variation. Empirical investigations of time series indicate that index dynamics are devoid of a diffusion component, which may be present in the dynamics of individual stocks. This leads to the conjecture, confirmed on options data, that the risk-neutral process should be free of a diffusion component. We conclude that the statistical and risk-neutral processes for equity prices are pure jump processes of infinite activity and finite variation.

    Metadata

    Item Type: Article
    Additional Information: The second author is currently (2006) Professor of Mathematics and Finance at Birkbeck College.
    Keyword(s) / Subject(s): equity, investigations, investments, Markov processes, rate of return, stock transfer
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Research Centre: Commodities Finance Centre
    Depositing User: Administrator
    Date Deposited: 12 Sep 2006
    Last Modified: 07 Dec 2016 15:31
    URI: http://eprints.bbk.ac.uk/id/eprint/411

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