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Empirical distributions of stock returns: scandinavian securities markets, 1990-95

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  • Aparicio, Felipe M.
  • Estrada, Javier

Abstract

The assumption that stock rctums are normally distributed has long been disputed by the data. In this article we test (and clearly reject) the normality assumption using time series of stock retums for each of the four Scandinavian markets during the first half of this decade. More importantly, we fit to the data four altematiw specifications, find empirical support for the scaled-t distribution, and quantify the magnitude of the error that stems from predicting stock retums by lIsing a Nom1al distribution. Ke)

Suggested Citation

  • Aparicio, Felipe M. & Estrada, Javier, 1996. "Empirical distributions of stock returns: scandinavian securities markets, 1990-95," DES - Working Papers. Statistics and Econometrics. WS 10487, Universidad Carlos III de Madrid. Departamento de Estadística.
    • Handle: RePEc:cte:wsrepe:10487
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    References listed on IDEAS

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    1. Clark, Peter K, 1973. "A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices," Econometrica, Econometric Society, vol. 41(1), pages 135-155, January.
    2. Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
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