Equities
Overview
The starting point for a Qunatitative description of equities is the statistical theory of
time series. That is, an equity price is seen as
a sequence of prices over time, such as
{% P_0, P_1, ..., P_n %}
Due to the issues with
time series and stationarity,
an equity price series is usually transformed into a series of
returns first.
Equity Models and Assumptions
Depending on the type of analysis that is required, it is often the case that a model and a set of assumptions is
layered into the analysis.
- Dicrete :
in the discrete case, the price (or return) series is taken as given, a time series of discrete points with a set difference in
time between each point. In such a case, it is often further assumed that each return is drawn from a
log normal distribution.
-
Continuous :
some models assume that the asset price is continuous in time. This assumption is made mostly for the power that
comes with the use of stochastic calculus methods. The stsandard model of a continuous asset price is
the geometric brownian motion.
Topics
