Asset returns have certain statistical properties, also called *stylized facts*. Important ones are:

**Absence of autocorrelation**: basically the direction of the return of one day doesn’t tell you anything useful about the direction of the next day.**Fat tails**: returns are not normal, i.e. there are many more extreme events than there would be if returns were normal.**Volatility clustering**: basically financial markets exhibit high-volatility and low-volatility regimes.**Leverage effect**: high-volatility regimes tend to coincide with falling prices and vice versa.

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