Density forecasting of the Dow Jones share index
The distribution of differences in logarithms of the Dow Jones share index is compared to the normal (N), normal mixture (NM) and a weighted sum of a normal and an Assymetric Laplace distribution (NAL). It is found that the NAL fits best. We came to this result by studying samples with high, medium and low volatility, thus circumventing strong heteroscedasticity in the entire series. The NAL distribution also fitted economic growth, thus revealing a new analogy between financial data and real growth.
|Date of creation:||2009|
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- Aghion, Philippe & Howitt, Peter, 1992.
"A Model of Growth through Creative Destruction,"
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- Diebold, Francis X & Gunther, Todd A & Tay, Anthony S, 1998. "Evaluating Density Forecasts with Applications to Financial Risk Management," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 863-883, November. Full references (including those not matched with items on IDEAS)
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