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Stylized facts on the temporal and distributional properties of daily FT-SE returns

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  • Terence Mills

Abstract

This paper investigates the temporal and distributional properties of the London Stock Exchange FT-SE daily indices by examining the autocorrelations and distributions of a family of return transformations. Power transformations of absolute returns are more highly autocorrelated than actual returns, with the strongest autocorrelation occurring for powers around unity. Such transformed returns do not, however, display long-term memory. Absolute returns, after outlier reduction, are approximately exponentially distributed and the analysis suggests that they could be modelled by asymmetric GARCH processes

Suggested Citation

  • Terence Mills, 1997. "Stylized facts on the temporal and distributional properties of daily FT-SE returns," Applied Financial Economics, Taylor & Francis Journals, vol. 7(6), pages 599-604.
  • Handle: RePEc:taf:apfiec:v:7:y:1997:i:6:p:599-604
    DOI: 10.1080/758533851
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    Cited by:

    1. Thomas Lux, 2003. "The Multi-Fractal Model of Asset Returns:Its Estimation via GMM and Its Use for Volatility Forecasting," Computing in Economics and Finance 2003 14, Society for Computational Economics.
    2. Lux, Thomas & Morales-Arias, Leonardo, 2010. "Forecasting volatility under fractality, regime-switching, long memory and student-t innovations," Computational Statistics & Data Analysis, Elsevier, vol. 54(11), pages 2676-2692, November.
    3. Segnon, Mawuli & Lux, Thomas, 2013. "Multifractal models in finance: Their origin, properties, and applications," Kiel Working Papers 1860, Kiel Institute for the World Economy (IfW).
    4. Lux, Thomas & Morales-Arias, Leonardo & Sattarhoff, Cristina, 2011. "A Markov-switching multifractal approach to forecasting realized volatility," Kiel Working Papers 1737, Kiel Institute for the World Economy (IfW).

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