Density forecasting of the Dow Jones share index
AbstractThe distribution of differences in logarithms of the Dow Jones share index is compared to the normal (N), normal mixture (NM) and a weighted sum of a normal and an Assymetric Laplace distribution (NAL). It is found that the NAL fits best. We came to this result by studying samples with high, medium and low volatility, thus circumventing strong heteroscedasticity in the entire series. The NAL distribution also fitted economic growth, thus revealing a new analogy between financial data and real growth.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 18582.
Date of creation: 2009
Date of revision:
Density forecasting; heteroscedasticity; mixed Normal- Asymmetric Laplace distribution; Method of Moments estimation; connection with economic growth.;
Find related papers by JEL classification:
- C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-14 (All new papers)
- NEP-ECM-2009-11-14 (Econometrics)
- NEP-FMK-2009-11-14 (Financial Markets)
- NEP-FOR-2009-11-14 (Forecasting)
- NEP-ORE-2009-11-14 (Operations Research)
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