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Modeling Commodity Market Returns: The Challenge of Leptokurtic Distributions

In: Advances in Analytics and Applications

Author

Listed:
  • Arnab Kumar Laha

    (Indian Institute of Management Ahmedabad)

  • A. C. Pravida Raja

    (Indian Institute of Management Ahmedabad)

Abstract

In this chapter, we consider modeling leptokurtic daily log-return distributions of three commodities: gold, silver, and crude oil. Three modeling approaches are tried out namely (a) a two-component mixture of normal distributions model, (b) Variance Gamma (VG) distribution model, and (c) Generalized Secant Hyperbolic (GSH) distribution model. The two-component mixture of normal distributions model is found to be a reasonable model for log-returns on gold and crude oil. The VG distribution model and the GSH distribution model are not found to be suitable for modeling log-returns for any of the three commodities considered in this chapter.

Suggested Citation

  • Arnab Kumar Laha & A. C. Pravida Raja, 2019. "Modeling Commodity Market Returns: The Challenge of Leptokurtic Distributions," Springer Proceedings in Business and Economics, in: Arnab Kumar Laha (ed.), Advances in Analytics and Applications, pages 203-224, Springer.
    • Handle: RePEc:spr:prbchp:978-981-13-1208-3_17
    DOI: 10.1007/978-981-13-1208-3_17
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