Abstract
ABSTRACTThis paper discusses the statistical properties of a mixed stochastic process and conducts a thorough empirical test of the process for an extensive group of common stocks and portfolios of stocks. It is found that a homogeneous diffusion process does not adequately describe stock price fluctuations and that there are significant discontinuities in the sample paths of stock prices. This result holds for both individual stocks and portfolios of various sizes. The statistical fit of a particular mixed diffusion‐jump process to sample data is also demonstrated.
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