On the gap between an empirical distribution and an exponential distribution of waiting times for price changes in a financial market
arXiv:physics/0606005 · doi:10.1016/j.physa.2006.10.094
Abstract
We analyze waiting times for price changes in a foreign currency exchange rate. Recent empirical studies of high frequency financial data support that trades in financial markets do not follow a Poisson process and the waiting times between trades are not exponentially distributed. Here we show that our data is well approximated by a Weibull distribution rather than an exponential distribution in a non-asymptotic regime. Moreover, we quantitatively evaluate how much an empirical data is far from an exponential distribution using a Weibull fit. Finally, we discuss a phase transition between a Weibull-law and a power-law in the asymptotic long waiting time regime.
9 pages, 6 figures, submitted for a publication and under review
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