Empirical features of returns 22Simple and log returns cannot be distinguished in such graphs
Erratic (“white noise”), strongly oscillating behavior of returns around themore or less constant mean (“stationary process” i.p. “meanreverting”)Variance / volatility (standard deviation) is not constant over time(“heteroskedasticity”) i.p. we haveperiods of different length withapproximately the same degree of variation (“volatility clustering”)Single-period random cash flows: Stocks