IDEAS home Printed from https://ideas.repec.org/a/cpn/umkcjf/v6y2017i2p9-21.html
   My bibliography  Save this article

Heavy-Tailed Distributions And The Canadian Stock Market Returns

Author

Listed:
  • David Eden
  • Paul Huffman
  • John Holman

    (Bank of Canada
    University of Manitoba
    Illinois State University)

Abstract

Many of financial engineering theories are based on so-called “complete markets” and on the use of the Black-Scholes formula. The formula relies on the assumption that asset prices follow a log-normal distribution, or in other words, the daily fluctuations in prices viewed as percentage changes follow a Gaussian distribution. On the contrary, studies of actual asset prices show that they do not follow a log-normal distribution. In this paper, we investigate several widely-used heavy-tailed distributions. Our results indicate that the Skewed t distribution has the best empirical performance in fitting the Canadian stock market returns. We claim the results are valuable for market participants and the financial industry.

Suggested Citation

  • David Eden & Paul Huffman & John Holman, 2017. "Heavy-Tailed Distributions And The Canadian Stock Market Returns," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 6(2), pages 9-21.
    • Handle: RePEc:cpn:umkcjf:v:6:y:2017:i:2:p:9-21
    as

    Download full text from publisher

    File URL: https://apcz.umk.pl/CJFA/article/view/CJFA.2017.007/13533
    Download Restriction: no
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpn:umkcjf:v:6:y:2017:i:2:p:9-21. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Miroslawa Buczynska (email available below). General contact details of provider: http://www.wydawnictwoumk.pl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.