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Apparent Scaling

by Ole E. Barndorff-Nielsen and Karsten Prause
Research Reports Number 408 (October 1999)
A number of authors have reported empirically observed scaling laws of the absolute values of log returns of stocks and exchange rates, with a scaling coefficient in the order of 0.58-0.59. It is suggested here that this phenomenon is largely due to the semi-heavy tailedness of the distributions concerned rather than to real scaling.
Format available: PDF (288 KB)
To appear in Finance and Stochastics