Defining an Intrinsic ‘Stickiness’ Parameter of Stock Price Returns

Physica A547, DOI: 10.1016/j.physa.2020.124464 (2020).

22 Pages Posted: 3 Jun 2020

See all articles by Jorgen Vitting Andersen

Jorgen Vitting Andersen

CES, Université Paris 1 Panthéon-Sorbonne

Date Written: October 1, 2019

Abstract

We introduce a non-linear pricing model of individual stock returns that defines a ”stickiness” parameter of the returns. The pricing model resembles the capital asset pricing model (CAPM) used in finance but has a non-linear component inspired from models of earth quake tectonic plate movements. The link to tectonic plate movements happens, since price movements of a given stock index is seen adding “stress” to its components of individual stock returns, in order to follow the index. How closely individual stocks follow the index’s price movements, can then be used to define their “stickiness”.

Keywords: non-linear CAPM, “stickiness” of stock returns

JEL Classification: G00, G02, G12

Suggested Citation

Vitting Andersen, Jorgen, Defining an Intrinsic ‘Stickiness’ Parameter of Stock Price Returns (October 1, 2019). Physica A547, DOI: 10.1016/j.physa.2020.124464 (2020)., Available at SSRN: https://ssrn.com/abstract=3594466 or http://dx.doi.org/10.2139/ssrn.3594466

Jorgen Vitting Andersen (Contact Author)

CES, Université Paris 1 Panthéon-Sorbonne ( email )

Maison des Sciences Economiques
106-112 Boulevard de l'Hôpital 75647 Paris Cedex
Paris, 75647
France

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