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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- Rafal Weron, 2003.
"Levy-stable distributions revisited: tail index > 2 does not exclude the Levy-stable regime,"
- 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.
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- Weron, Rafal, 1996. "On the Chambers-Mallows-Stuck method for simulating skewed stable random variables," Statistics & Probability Letters, Elsevier, vol. 28(2), pages 165-171, June.
- Nolan, John P., 1998. "Parameterizations and modes of stable distributions," Statistics & Probability Letters, Elsevier, vol. 38(2), pages 187-195, June.
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