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Abstract–Risk and Price Distributions

Published online by Cambridge University Press:  19 October 2009

Extract

While a substantial body of evidence exists indicating that the distribution of price changes in speculative markets is not normally distributed, there is some question about which theoretical distribution best describes price changes. This paper derives and tests an alternative distribution based on the incorporation of vectors of information bits into prices. The resultant distribution uses two parameters, u and β, to measure the response of price lags to given information vectors and can be interpreted as measures of risk.

Type
Investments–Equities I
Copyright
Copyright © School of Business Administration, University of Washington 1974

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