On the gap between an empirical distribution and an exponential distribution of waiting times for price changes in a financial market
Abstract
We analyze waiting times for price changes in a foreign currency exchange rate. Recent empirical studies of high-frequency financial data support that trades in financial markets do not follow a Poisson process and the waiting times between trades are not exponentially distributed. Here we show that our data is well approximated by a Weibull distribution rather than an exponential distribution in the non-asymptotic regime. Moreover, we quantitatively evaluate how much an empirical data is far from an exponential distribution using a Weibull fit. Finally, we discuss a transition between a Weibull-law and a power-law in the long time asymptotic regime.
- Publication:
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Physica A Statistical Mechanics and its Applications
- Pub Date:
- March 2007
- DOI:
- 10.1016/j.physa.2006.10.094
- arXiv:
- arXiv:physics/0606005
- Bibcode:
- 2007PhyA..376..500S
- Keywords:
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- Physics - Physics and Society;
- Physics - Data Analysis;
- Statistics and Probability;
- Quantitative Finance - Statistical Finance
- E-Print:
- 9 pages, 6 figures, submitted for a publication and under review