Introduction to Bloomberg Terminals

Lesson 4 - The Scaling of Stock Prices

1. Video: Making Money from Pascal's Triangle

The mathematics of stock prices is fascinating. It has surprising links to elementary subjects such as Pascal's Triangle and not-so-elementary topics such as heat and diffusion. In this video we develop a theory of the scaling properties of stock prices and connect it to other areas of mathematics. Your task will be to check the theory is true using Bloomberg data.

2. Exercise

Download a year's worth of data for the FTSE 100 and check that the standard deviation in the change of the log of the stock price each week is related as predicted to the change in the log of the stock price every four weeks.

To do this you will need to use the standard deviation function in excel. You can find this by clicking on the drop down menu on on the Auto Sum button in Excel, then selecting More Functions and then STDDEV.