The Limiting Extremal Behaviour of Speculative Returns: An Analysis of Intra-Daily Data from the Frankfurt Stock Exchange
This paper provides a statistical analysis of high-frequency recordings of the German share price index DAX. The data set extends from November 1988 to the end of the year 1995 and includes all minute-to-minute changes during trading hours at the Frankfurt Stock Exchange. The focus of this study is on the limiting behaviour characterising the tail regions of the empirical distribution. Application of the popular Hill estimator for the tail shape yields results very similar to those of other analyses of speculative returns. However, since the reliability of tail index estimation rests on the appropriateness of the tail regions, the question of optimally choosing the sample fraction emerges. Exploiting recent advances in extreme value theory I apply a couple of novel methods for determining the optimal cut-off value for the tail of the empirical distribution. As it turns out, most algorithms suggest that one has to go out quite far into the tails for estimation of the extremal index. The findings obtained at the highest frequency (minute-to-minute returns) are confirmed when considering data at various levels of time-aggregation. A test for stability of extreme value behaviour over time gives no clear indication of changes of the limiting distribution. It is also illustrated how the approximation of the tails can be used to estimate the likelihood of large returns.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:|
|Date of revision:||Jul 1998|
|Contact details of provider:|| Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany|
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de
When requesting a correction, please mention this item's handle: RePEc:bon:bonsfb:436. 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: (BGSE Office)
If references are entirely missing, you can add them using this form.