Article1972

The Distribution of Share Price Changes

533 citations0/0 files storedThe Journal of Business

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Stochastic processes and financial applications Financial Markets and Investment Strategies Complex Systems and Time Series Analysis

Abstract

This paper presents both theoretical and empirical evidence about a probability distribution which describes the behavior of share price changes. Osborne's Brownian motion theory of share price changes is modified to account for the changing variance of the share market. This produces a scaled t-distribution which is an excellent fit to series of share price indices. This distribution is the only known simple distribution to fit changes in share prices. It provides a far better fit to the data than the stable Paretian, compound process, and normal distributions.

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2000The Distribution of Stock Return Volatility 1977Long-term dependence in common stock returns 1989On the Frequency of Large Stock Returns: Putting Booms and Busts into Perspective 1991Option Pricing With V. G. Martingale Components1 1987Option Pricing when the Variance is Changing 2006Chapter 15 Volatility and Correlation Forecasting 1972The Distribution of Stock Returns 1999Skewness in financial returns

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