Defining an intrinsic "stickiness" parameter of stock price returns

Naji Massad (1) , Jørgen Vitting Andersen (1, 2)

1 CES - Centre d'économie de la Sorbonne
2 CNRS - Centre National de la Recherche Scientifique

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".

Mots clés: non-linear CAPM; stickiness of stock returns

Domaines: Economies et finances

Naji Massad, Jørgen Vitting Andersen. Defining an intrinsic "stickiness" parameter of stock price returns. 2019. ⟨halshs-02385901⟩