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On the Distributional Characterization of Log-returns of a World Stock Index

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Author Info
Kevin Fergusson (School of Finance and Economics, University of Technology, Sydney)
Eckhard Platen () (School of Finance and Economics, University of Technology, Sydney)

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Abstract

In this paper we identify distributions which suitably fit log-returns of the world stock index (WSI) when these are expressed in units of different currencies. By searching for a best fit in the class of symmetric generalized hyperbolic distributions the maximum likelihood estimates appear to cluster in the neighborhood of those of the Student t distribution. This is confirmed on a high significance level under the likelihood ratio test.

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File URL: http://www.business.uts.edu.au/qfrc/research/research_papers/rp153.pdf
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Publisher Info
Paper provided by Quantitative Finance Research Centre, University of Technology, Sydney in its series Research Paper Series with number 153.

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Length: 22
Date of creation: 01 Mar 2005
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Handle: RePEc:uts:rpaper:153

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Related research
Keywords: world stock index benchmarked log-return Student t distribution symmetric generalized hyperbolic distribution

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Find related papers by JEL classification:
G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Clark, Peter K, 1973. "A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices," Econometrica, Econometric Society, vol. 41(1), pages 135-55, January. [Downloadable!] (restricted)
  2. Praetz, Peter D, 1972. "The Distribution of Share Price Changes," Journal of Business, University of Chicago Press, vol. 45(1), pages 49-55, January. [Downloadable!] (restricted)
  3. Eckhard Platen & Gerhard Stahl, 2003. "A Structure for General and Specific Market Risk," Research Paper Series 91, Quantitative Finance Research Centre, University of Technology, Sydney. [Downloadable!]
  4. Eckhard Platen, 2004. "Diversified Portfolios with Jumps in a Benchmark Framework," Research Paper Series 129, Quantitative Finance Research Centre, University of Technology, Sydney. [Downloadable!]
    Other versions:
  5. Blattberg, Robert C & Gonedes, Nicholas J, 1974. "A Comparison of the Stable and Student Distributions as Statistical Models for Stock Prices," Journal of Business, University of Chicago Press, vol. 47(2), pages 244-80, April. [Downloadable!] (restricted)
  6. Long, John Jr., 1990. "The numeraire portfolio," Journal of Financial Economics, Elsevier, vol. 26(1), pages 29-69, July. [Downloadable!] (restricted)
  7. Eckhard Platen, 2003. "Modeling the Volatility and Expected Value of a Diversified World Index," Research Paper Series 103, Quantitative Finance Research Centre, University of Technology, Sydney. [Downloadable!]
  8. Eckhard Platen, 2001. "A Minimal Financial Market Model," Research Paper Series 48, Quantitative Finance Research Centre, University of Technology, Sydney.
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  9. Markowitz, Harry M & Usmen, Nilufer, 1996. "The Likelihood of Various Stock Market Return Distributions, Part 1: Principles of Inference," Journal of Risk and Uncertainty, Springer, vol. 13(3), pages 207-19, November.
  10. Eckhard Platen, 2001. "Arbitrage in Continuous Complete Markets," Research Paper Series 72, Quantitative Finance Research Centre, University of Technology, Sydney. [Downloadable!]
  11. Eckhard Platen, 2003. "A Benchmark Framework for Risk Management," Research Paper Series 113, Quantitative Finance Research Centre, University of Technology, Sydney. [Downloadable!]
  12. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Eckhard Platen & Renata Rendek, 2007. "Empirical Evidence on Student-t Log-Returns of Diversified World Stock Indices," Research Paper Series 194, Quantitative Finance Research Centre, University of Technology, Sydney. [Downloadable!]
  2. Eckhard Platen, 2005. "Investments for the Short and Long Run," Research Paper Series 163, Quantitative Finance Research Centre, University of Technology, Sydney. [Downloadable!]
  3. Eckhard Platen, 2006. "On the Pricing and Hedging of Long Dated Zero Coupon Bonds," Research Paper Series 185, Quantitative Finance Research Centre, University of Technology, Sydney. [Downloadable!]
  4. Truc Le & Eckhard Platen, 2006. "Approximating the Growth Optimal Portfolio with a Diversified World Stock Index," Research Paper Series 184, Quantitative Finance Research Centre, University of Technology, Sydney. [Downloadable!]
    Other versions:
  5. David Heath & Eckhard Platen, 2006. "Local volatility function models under a benchmark approach," Quantitative Finance, Taylor and Francis Journals, vol. 6(3), pages 197-206, June. [Downloadable!] (restricted)
    Other versions:
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