Stylized Facts of Financial Returns › Universality Across Markets
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A remarkable aspect of these stylized facts is their universality. They appear in:
- Different asset classes (equities, bonds, currencies, commodities)
- Different geographic markets (US, Europe, Asia, emerging markets)
- Different time periods (pre-WWII, post-WWII, modern era)
- Different frequencies (minute, hourly, daily, weekly)
While the specific parameter values vary (emerging market equities have higher kurtosis than developed markets, currencies show less skewness than equities), the qualitative features persist. This universality suggests these patterns reflect fundamental aspects of how markets aggregate information and how participants behave, rather than artifacts of specific market structures.
The persistence of these facts across diverse settings reinforces their importance for financial modeling. Any model that ignores heavy tails, volatility clustering, or the leverage effect will systematically misjudge risk and misprice derivatives across virtually all financial markets.