MODELLING OF STOCK RETURN VOLATILITY

In this study, we investigate the statistical properties of the stock return volatility, defined as the absolute value of the logarithmic relative price changes. We show examples of power-law and of exponential-law for the volatility observed in the Japanese stock markets, and propose a stochastic model of stock markets inspired from physics to explore the empirical findings. In particular, we show that the model can naturally illustrate how power laws and exponential laws can arise.