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Flexible Models for Stock Returns Based on Student's T Distribution

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  • Emmanuel Afuecheta
  • Stephen Chan
  • Saralees Nadarajah

Abstract

Models based on the Student's t distribution are proposed with its scale parameter randomized. Mathematical properties of the models such as their probability density functions, cumulative distribution functions, moments and characteristic functions are derived. Three of the models are fitted to daily log returns of six financial indices. They were shown to provide better fits than mixtures of Student's t distributions and the popular generalized hyperbolic distribution.

Suggested Citation

  • Emmanuel Afuecheta & Stephen Chan & Saralees Nadarajah, 2019. "Flexible Models for Stock Returns Based on Student's T Distribution," Manchester School, University of Manchester, vol. 87(3), pages 403-427, June.
    • Handle: RePEc:bla:manchs:v:87:y:2019:i:3:p:403-427
    DOI: 10.1111/manc.12234
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    Cited by:

    1. Emmanuel Afuecheta & Chigozie Utazi & Edmore Ranganai & Chibuzor Nnanatu, 2023. "An Application of Extreme Value Theory for Measuring Financial Risk in BRICS Economies," Annals of Data Science, Springer, vol. 10(2), pages 251-290, April.

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