An empirical examination of the return distribution characteristics of agency mortgage pass-through securities
The study investigates whether the stable Paretian hypothesis is more adequate to explain the returns of US agency mortgage pass-through securities than the traditional normal distribution assumption. The daily returns of six representative index generics of Lehman Brothers are investigated in the framework of three different probabilistic models: independent, identically distributed model, the EWMA model, and the ARMA-GARCH model. It is found that the stable Paretian hypothesis better explains not only the tails but the central part of the distribution as well.
Volume (Year): 16 (2006)
Issue (Month): 15 ()
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- Benoit Mandelbrot, 1963. "The Variation of Certain Speculative Prices," The Journal of Business, University of Chicago Press, vol. 36, pages 394.
- Mittnik, Stefan & Paolella, Marc S. & Rachev, Svetlozar T., 2002. "Stationarity of stable power-GARCH processes," Journal of Econometrics, Elsevier, vol. 106(1), pages 97-107, January.
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