Statistics Papers
Document Type
Journal Article
Date of this Version
6-2002
Publication Source
IEEE Transactions on Information Theory
Volume
48
Issue
6
Start Page
1372
Last Page
1378
DOI
10.1109/TIT.2002.1003827
Abstract
The author presents a new model for stock price fluctuations based on a concept of "information." In contrast, the usual Black-Scholes-Merton-Samuelson (1965, 1973) model is based on the explicit assumption that information is uniformly held by everyone and plays no role in stock prices. The new model is based on the evident nonuniformity of information in the market and the evident time delay until new information becomes generally known. A second contribution of the paper is to present some problems with explicit solutions which are of value in obtaining insights. Several problems of mathematical interest are compared in order to better understand which optimal stopping problems have explicit solutions
Keywords
information theory, optimisation, stock markets, information nonuniformity, optimal stopping problems, stock price fluctuations model, stock prices, time delay, control theory, cost accounting, delay effects, fluctuations, helium, mathematics, pricing, statistics, stochastic processes, stock markets
Recommended Citation
Shepp, L. A. (2002). A Model for Stock Price Fluctuations Based on Information. IEEE Transactions on Information Theory, 48 (6), 1372-1378. http://dx.doi.org/10.1109/TIT.2002.1003827
Date Posted: 27 November 2017
This document has been peer reviewed.