Inverse Statistics in Economics: The Gain-Loss Asymmetry

6 Pages Posted: 13 Dec 2002

See all articles by Mogens H. Jensen

Mogens H. Jensen

Niels Bohr Institute

Anders Johansen

Riso National Laboratory - Wind Energy Department; University of Copenhagen, Niels Bohr. Inst.; University of California, Los Angeles (UCLA) - Institute of Geophysics and Planetary Physics

Ingve Simonsen

Nordita

Date Written: October 28, 2002

Abstract

Inverse statistics in economics is considered. We argue that the natural candidate for such statistics is the investment horizons distribution. This distribution of waiting times needed to achieve a predefined level of return is obtained from (often detrended) historic asset prices. Such a distribution typically goes through a maximum at a time called the {\em optimal investment horizon}, $\tau^*_\rho$, since this defines the most likely waiting time for obtaining a given return $\rho$. By considering equal positive and negative levels of return, we report on a quantitative gain-loss asymmetry most pronounced for short horizons. It is argued that this asymmetry reflects the market dynamics and we speculate over the origin of this asymmetry.

Suggested Citation

Jensen, Mogens H. and Johansen, Anders and Simonsen, Ingve, Inverse Statistics in Economics: The Gain-Loss Asymmetry (October 28, 2002). Available at SSRN: https://ssrn.com/abstract=348300 or http://dx.doi.org/10.2139/ssrn.348300

Mogens H. Jensen (Contact Author)

Niels Bohr Institute ( email )

Blegdamsvej 17
2100 Kbh.O
Denmark

Anders Johansen

Riso National Laboratory - Wind Energy Department ( email )

Frederiksborgvej 399 Build. 118
P.O. 49
DK-4000 Roskilde
Denmark
+45 4677 5004 (Phone)
+45 4677 5083 (Fax)

HOME PAGE: http://www.risoe.dk/vea/staff/andj/

University of Copenhagen, Niels Bohr. Inst. ( email )

Blegdamsvej 17
DK-2100 Copenhagen
Denmark

University of California, Los Angeles (UCLA) - Institute of Geophysics and Planetary Physics ( email )

Box 951567
Los Angeles, CA 90095-1567
United States
(310) 825 0961 (Phone)
(310) 206 3051 (Fax)

Ingve Simonsen

Nordita ( email )

Blegdamsvej 17
DK-2100 Copenhagen
Denmark

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
148
Abstract Views
1,160
rank
244,682
PlumX Metrics