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arXiv · 0812.4455

Probability of Large Movements in Financial Markets

Robert Kitt·Maksim Sakki·Jaan Kalda
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Abstract

Based on empirical financial time-series, we show that the "silence-breaking" probability follows a super-universal power law: the probability of observing a large movement is inversely proportional to the length of the on-going low-variability period. Such a scaling law has been previously predicted theoretically [R. Kitt, J. Kalda, Physica A 353 (2005) 480], assuming that the length-distribution of the low-variability periods follows a multiscaling power law.

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Robert Kitt, Maksim Sakki, Jaan Kalda. 2009-09-06. Probability of Large Movements in Financial Markets. https://doi.org/10.1016/j.physa.2009.07.027

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