The art of fitting financial time series with Levy stable distributions
This paper illustrates a procedure for fitting financial data with alpha-stable distributions. After using all the available methods to evaluate the distribution parameters, one can qualitatively select the best estimate and run some goodness-of-fit tests on this estimate, in order to quantitatively assess its quality. It turns out that, for the two investigated data sets (MIB30 and DJIA from 2000 to present), an alpha-stable fit of log-returns is reasonably good.
|Date of creation:||23 Aug 2006|
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- Rafał Weron, 2001.
"Levy-Stable Distributions Revisited: Tail Index > 2 Does Not Exclude The Levy-Stable Regime,"
International Journal of Modern Physics C (IJMPC),
World Scientific Publishing Co. Pte. Ltd., vol. 12(02), pages 209-223.
- Rafal Weron, 2001. "Levy-stable distributions revisited: tail index > 2 does not exclude the Levy-stable regime," HSC Research Reports HSC/01/01, Hugo Steinhaus Center, Wroclaw University of Technology.
- Rafal Weron, 2003. "Levy-stable distributions revisited: tail index > 2 does not exclude the Levy-stable regime," Econometrics 0305003, EconWPA.
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- Benoit Mandelbrot, 1963. "The Variation of Certain Speculative Prices," The Journal of Business, University of Chicago Press, vol. 36, pages 394-394.
- Nolan, John P., 1998. "Parameterizations and modes of stable distributions," Statistics & Probability Letters, Elsevier, vol. 38(2), pages 187-195, June. Full references (including those not matched with items on IDEAS)
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