Bank of America Stock Price Research

Author: Pancheng Qu

ABSTRACT
The stock price is always an interesting topic. On the one hand, from intuition, the stock price of bank is relatively stable since bank usually does not take risk behavior. From 2007 to 2014, the price of stock of Bank of American is relatively stable by checking the RRV (relative realized volatility). There is only one day has relatively high RRVs during 2007 to 2014. The date May 6th 2010, which called crash day, is a special day that needs to analyze separately. On the other hand, to find the pattern of frequency of trading, there are different sample sizes tested and compared with Poisson distribution. The result is that we can use Poisson distribution to predict probability of no arrival trade when second gap is relatively small. In addition, when plotting the daily 100 seconds accumulated RV (realized volatility) and daily average RV, there was found strong linear relationship between these two variables. In the end, using the Heston model to verify if there exist linear relationship between daily average and mean reversion rate. Then comparing trend of alpha with weekly VIX from Yahoo Finance. When using 5 days as a period to calculate the daily average RV and mean reversion rate, the significance of linear relationship is stronger. It proved the statistic intuition that larger sample size tends to decrease the volatility. The overall trend of VIX from Yahoo Finance is similar to the shape of five-day period alpha.

Source:

Journal: Journal of Financial Risk Management
DOI: 10.4236/jfrm.2020.92007(PDF)
Paper Id: 101085 (metadata)

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