Phys. Rev. E 65, 037106 (2002) [3 pages]Fractional Langevin model of memory in financial time seriesReceived 13 April 2001; published 6 March 2002 Financial time series are random with the absolute value of the price index fluctuations having an inverse power-law correlation. A dynamical model of this behavior is proposed using a fractional Langevin equation. The physical basis for this model is the divergence of the microscopic time scale to overlap with the macroscopic time scale: a condition that is not observed in classical statistical mechanics. This time-scale separation provides a mechanism for the market to adjust the volitility of the price index fluctuations. © 2002 The American Physical Society URL:
http://link.aps.org/doi/10.1103/PhysRevE.65.037106
DOI:
10.1103/PhysRevE.65.037106
PACS:
89.75.Da, 05.45.Tp, 89.65.Gh
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