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Inverse Statistics in Economics : The gain-loss asymmetry

Mogens H. Jensen·Anders Johansen·Ingve Simonsen
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Abstract

Inverse statistics in economics is considered. We argue that the natural candidate for such statistics is the investment horizons distribution. This distribution of waiting times needed to achieve a predefined level of return is obtained from (often detrended) historic asset prices. Such a distribution typically goes through a maximum at a time called the {\em optimal investment horizon}, $τ^*_ρ$, since this defines the most likely waiting time for obtaining a given return $ρ$. By considering equal positive and negative levels of return, we report on a quantitative gain-loss asymmetry most pronounced for short horizons. It is argued that this asymmetry reflects the market dynamics and we speculate over the origin of this asymmetry.

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Mogens H. Jensen, Anders Johansen, Ingve Simonsen. 2002-11-02. Inverse Statistics in Economics : The gain-loss asymmetry. https://doi.org/10.1016/s0378-4371(02)01884-8

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