In part (iii), one of the reasons provided why the model is inappropriate for modelling share prices is the Non-normality jumps in share prices. Are the jumps of share prices supposed to be Gaussian?
Thanks Dukerio So the sentence should mean, "non-normality of the share price movements in reality, ie: there are more jumps than suggested by the model". Cheeeers!
The non normality of share price movements is about a bit more than just the jumps. In reality, the distribution of the (log of) share price movements will be more peaked and fatter tailed than the normal distribution predicts: More peaked because there are many days where share prices hardly move at all (for example, last year, the BPP share price went for 3 weeks without moving) and fatter tailed because big movements (especially big downward movements) happen more often in reality than is predicted by the normal model. (Expect you had this sussed anyway, but just in case ...)
