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Inverse statistics and information content

Author

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  • Ebadi, H.
  • Bolgorian, Meysam
  • Jafari, G.R.

Abstract

Inverse statistics analysis studies the distribution of investment horizons to achieve a predefined level of return. This distribution provides a maximum investment horizon which determines the most likely horizon for gaining a specific return. There exists a significant difference between inverse statistics of financial market data and a fractional Brownian motion (fBm) as an uncorrelated time-series, which is a suitable criteria to measure information content in financial data. In this paper we perform this analysis for the DJIA and S&P500 as two developed markets and Tehran price index (TEPIX) as an emerging market. We also compare these probability distributions with fBm probability, to detect when the behavior of the stocks are the same as fBm.

Suggested Citation

  • Ebadi, H. & Bolgorian, Meysam & Jafari, G.R., 2010. "Inverse statistics and information content," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(23), pages 5439-5446.
    • Handle: RePEc:eee:phsmap:v:389:y:2010:i:23:p:5439-5446
    DOI: 10.1016/j.physa.2010.08.006
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    Cited by:

    1. Jiang, Wuhao & Wang, Kai & Lv, Yan & Guo, Jianfeng & Ni, Zhongjin & Ni, Yihua, 2020. "Time series based behavior pattern quantification analysis and prediction — A study on animal behavior," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 540(C).

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    Keywords

    Inverse statistics; Investment horizon;

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