Scholion.ai

On the Distribution of Stock Price Differences

Benoit Mandelbrot, Howard M. Taylor

Operations Research · 1967 · Volume 15 · Issue 6

DOI: 10.1287/opre.15.6.1057

Abstract

Price changes over a fixed number of transactions may have a Gaussian distribution. Price changes over a fixed time period may follow a stable Paretian distribution, whose variance is infinite. Since the number of transactions in any time period is random, the above statements are not necessarily in disagreement. A possible explanation is proposed by Taylob, and then shown by Mandelbrot to be intimately related to an earlier discussion of the specialists' function of ensuring the continuity of the market.

Enable JavaScript for citation tools and additional paper interactions.