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Testing densities with financial data: an empirical comparison of the Edgeworth-Sargan density to the Student's t

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  • Ignacio Mauleon
  • Javier Perote

Abstract

The Edgeworth—Sargan density has been shown capable of capturing salient empirical regularities of financial data in some studies. The main purpose of the reported study is to compare its performance with other densities, most notably to the Student t. Both densities can account for thick tails, and asymmetry One important by product of the comparison is to test the existence of moments. The comparison of densities is carried out with daily financial observations, spanning 25 years of data from two major world stock markets. Attention is paid to the fitting of other empirical regularities, and especially to the peak, frequently found at the middle of the densities.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/13518470050020851
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal The European Journal of Finance.

Volume (Year): 6 (2000)
Issue (Month): 2 ()
Pages: 225-239

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Handle: RePEc:taf:eurjfi:v:6:y:2000:i:2:p:225-239

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Related research

Keywords: Densities Comparison Edgeworth-SARGAN Student T Distributions Financial Data Testing Moment Existence;

References

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Citations

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Cited by:
  1. Trino-Manuel Niguez & Javier Perote, 2004. "Forecasting the density of asset returns," LSE Research Online Documents on Economics 6845, London School of Economics and Political Science, LSE Library.
  2. Emmanuel Jurczenko & Bertrand Maillet & Bogdan Negrea, 2002. "Revisited multi-moment approximate option pricing models: a general comparison (Part 1)," LSE Research Online Documents on Economics 24950, London School of Economics and Political Science, LSE Library.
  3. Del Brio, Esther B. & Ñíguez, Trino-Manuel & Perote, Javier, 2008. "Multivariate Gram-Charlier Densities," MPRA Paper 29073, University Library of Munich, Germany.
  4. Del Brio, Esther B. & Mora-Valencia, Andrés & Perote, Javier, 2014. "Semi-nonparametric VaR forecasts for hedge funds during the recent crisis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 401(C), pages 330-343.
  5. Ñíguez, Trino-Manuel & Paya, Ivan & Peel, David & Perote, Javier, 2012. "On the stability of the constant relative risk aversion (CRRA) utility under high degrees of uncertainty," Economics Letters, Elsevier, vol. 115(2), pages 244-248.
  6. Mauleon, Ignacio, 2003. "Financial densities in emerging markets: an application of the multivariate ES density," Emerging Markets Review, Elsevier, vol. 4(2), pages 197-223, June.
  7. Del Brio, Esther B. & Perote, Javier, 2012. "Gram–Charlier densities: Maximum likelihood versus the method of moments," Insurance: Mathematics and Economics, Elsevier, vol. 51(3), pages 531-537.

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