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Some Properties of Absolute Return: An Alternative Measure of Risk

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  • C. W. J. Granger
  • Zhuanxin Ding

Abstract

The expected absolute return belongs to a class of risk measure derived by Luce (1980) from axioms. The paper considers the time series properties of and also the marginal distribution properties, for various properties of Theta. Using a long daily stock index series it is found that the autocorrelations decline slowly for all positive Theta but this "long-memory" property is strongest for Theta = 1, the absolute return. The moments of absolute returns, after removal of a few outliers, suggest that an exponential distribution is appropriate.

Suggested Citation

  • C. W. J. Granger & Zhuanxin Ding, 1995. "Some Properties of Absolute Return: An Alternative Measure of Risk," Annals of Economics and Statistics, GENES, issue 40, pages 67-91.
    • Handle: RePEc:adr:anecst:y:1995:i:40:p:67-91
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