Uncertainty in the Fluctuations of the Price of Stocks

TL;DR

This study analyzes the non-Gaussian fluctuations of the Tehran Price Index from 2001 to 2006, revealing increased volatility and tail behavior linked to political crises and critical time scales.

Contribution

It introduces a scale-dependent analysis of stock return distributions in an emerging market, highlighting the systematic increase in large fluctuations near critical periods.

Findings

Increased fluctuations during political crises

Scale-dependent non-Gaussian PDFs observed

Systematic rise in large return probabilities near critical times

Abstract

We report on a study of the Tehran Price Index (TEPIX) from 2001 to 2006 as an emerging market that has been affected by several political crises during the recent years, and analyze the non-Gaussian probability density function (PDF) of the log returns of the stocks' prices. We show that while the average of the index did not fall very much over the time period of the study, its day-to-day fluctuations strongly increased due to the crises. Using an approach based on multiplicative processes with a detrending procedure, we study the scale-dependence of the non-Gaussian PDFs, and show that the temporal dependence of their tails indicates a gradual and systematic increase in the probability of the appearance of large increments in the returns on approaching distinct critical time scales over which the TEPIX has exhibited maximum uncertainty.