On the Distributional Characterization of Daily Log-Returns of a World Stock Index
In this paper distributions are identified which suitably fit log-returns of the world stock index when these are expressed in units of different currencies. By searching for a best fit in the class of symmetric generalized hyperbolic distributions the maximum likelihood estimates appear to cluster in the neighbourhood of those of the Student t distribution. This is confirmed at a high significance level under the likelihood ratio test. Finally, the paper derives the minimal market model, which explains the empirical findings as a consequence of the optimal market dynamics.
Volume (Year): 13 (2006)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAMF20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAMF20|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eckhard Platen, 2001. "Arbitrage in Continuous Complete Markets," Research Paper Series 72, Quantitative Finance Research Centre, University of Technology, Sydney.
- Eckhard Platen & Gerhard Stahl, 2003.
"A Structure for General and Specific Market Risk,"
Research Paper Series
91, Quantitative Finance Research Centre, University of Technology, Sydney.
- Markowitz, Harry M & Usmen, Nilufer, 1996. "The Likelihood of Various Stock Market Return Distributions, Part 1: Principles of Inference," Journal of Risk and Uncertainty, Springer, vol. 13(3), pages 207-19, November.
- Eckhard Platen, 2006.
"A Benchmark Approach To Finance,"
Wiley Blackwell, vol. 16(1), pages 131-151.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
- Markowitz, Harry M & Usmen, Nilufer, 1996. "The Likelihood of Various Stock Market Return Distributions, Part 2: Empirical Results," Journal of Risk and Uncertainty, Springer, vol. 13(3), pages 221-47, November.
- Platen, Eckhard, 2000.
"A minimal financial market model,"
SFB 373 Discussion Papers
2000,91, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Clark, Peter K, 1973. "A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices," Econometrica, Econometric Society, vol. 41(1), pages 135-55, January.
- Eckhard Platen, 2004.
"Diversified Portfolios with Jumps in a Benchmark Framework,"
Research Paper Series
129, Quantitative Finance Research Centre, University of Technology, Sydney.
- Eckhard Platen, 2004. "Diversified Portfolios with Jumps in a Benchmark Framework," Asia-Pacific Financial Markets, Springer, vol. 11(1), pages 1-22, March.
When requesting a correction, please mention this item's handle: RePEc:taf:apmtfi:v:13:y:2006:i:1:p:19-38. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.