Hi I was wondering what is the model that best describes the price movement of the stock market?
- A Brownian motion Process with drift?
- An Ornstein Uhlenbeck_process? (where the long term mean is described by an ax+b function for the drift component)
- A model that uses stochastic volatility?
- Jump Diffusion Models?
- Or something else?
(I placed these 4 points to act as multiple choice bullets. I don't know how to make this question more specific, that is what I want to know, which model best fits the stock market.
Which model more realistically fits the stock market, which one will show volatility clustering, price appreciation, market shocks(jump diffusion), show leptokurtic distributions, mean reversion etc.
I see many models used but I haven't yet seen which one is standard for realistic simulations. I placed the 4 points up there as a guide to which class of mathematical models I'm referring to.
I realize that there can be many good ways to answer this question. I believe though that only a few models will approximate the way the stock market moves and behaves. So IDK.)