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Power-law behaviour in time durations between extreme returns

Author

Listed:
  • Juan C. Reboredo
  • Miguel A. Rivera-Castro
  • Edilson Machado de Assis

Abstract

This paper studies time durations between extreme returns with the aim of testing whether they follow power-law behaviour. Using the Hill estimator to identify extreme returns and estimate time durations, empirical evidence for intraday returns for the S&P 500, DAX and IBEX-35 stock market indexes indicates that the time durations between extreme events are well characterized by a -Weibull density with power-law behaviour tails. We also characterize the conditional time duration for an autoregressive conditional duration model with a -Weibull distribution.

Suggested Citation

  • Juan C. Reboredo & Miguel A. Rivera-Castro & Edilson Machado de Assis, 2014. "Power-law behaviour in time durations between extreme returns," Quantitative Finance, Taylor & Francis Journals, vol. 14(12), pages 2171-2183, December.
    • Handle: RePEc:taf:quantf:v:14:y:2014:i:12:p:2171-2183
    DOI: 10.1080/14697688.2013.822538
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    Cited by:

    1. Li, Wei-Zhen & Zhai, Jin-Rui & Jiang, Zhi-Qiang & Wang, Gang-Jin & Zhou, Wei-Xing, 2022. "Predicting tail events in a RIA-EVT-Copula framework," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 600(C).
    2. Zhi-Qiang Jiang & Gang-Jin Wang & Askery Canabarro & Boris Podobnik & Chi Xie & H. Eugene Stanley & Wei-Xing Zhou, 2018. "Short term prediction of extreme returns based on the recurrence interval analysis," Quantitative Finance, Taylor & Francis Journals, vol. 18(3), pages 353-370, March.
    3. Reyes-Santias, Francisco & Reboredo, Juan C. & de Assis, Edilson Machado & Rivera-Castro, Miguel A., 2021. "Does length of hospital stay reflect power-law behavior? A q-Weibull density approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 568(C).

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