Statistics and Its Interface

Volume 1 (2008)

Number 2

A new quantile function based model for modeling price behaviors in financial markets

Pages: 327 – 332

DOI: https://dx.doi.org/10.4310/SII.2008.v1.n2.a10

Authors

Gemai Chen (Department of Mathematics and Statistics, University of Calgary, Alberta, Canada)

Wenjiang Jiang (School of Mathematical Sciences, Yunnan Normal University, Kunming, Yunnan, China)

Zhenyu Wu (Edwards School of Business, University of Saskatchewan, Saskatoon, Saskatchewan, Canada)

Abstract

This paper uses a class of quantile functions to develop a new time series model for studying financial price behaviors through the tail properties of the price instead of the volatilities (variances) of the price. The model takes the updated information into account and characterizes the price behaviors using a tail order measure which helps forecast how volatile the prices will be, and a tail balance measure that helps estimate whether an investment tends to gain or tends to lose. The model parameters can be estimated using the method of maximum likelihood, and two real data sets are analyzed to show the potential usefulness of our proposed model.

Keywords

tail property, tail modeling, quantile function

2010 Mathematics Subject Classification

Primary 62G32. Secondary 62P05.

Full Text (PDF format)

Published 1 January 2008