Infinite Density at the Median and the Typical Shape of Stock Return Distributions
Statistics are developed to test for the presence of an asymptotic discontinuity (or infinite density or peakedness) in a probability density at the median. The approach makes use of work by Knight (1998) on L1 estimation asymptotics in conjunction with non-parametric kernel density estimation methods. The size and power of the tests are assessed, and conditions under which the tests have good performance are explored in simulations. The new methods are applied to stock returns of leading companies across major U.S. industry groups. The results confirm the presence of infinite density at the median as a new significant empirical evidence for stock return distributions.
|Date of creation:||Apr 2009|
|Date of revision:|
|Publication status:||Published in SMU-SKBI CoFie Working Paper|
|Contact details of provider:|| Postal: 50 Stamford Road, Singapore 178903|
Phone: (65) 6828 0877
Fax: (65) 6828 0888
Web page: http://www.smu.edu.sg/institutes/skbife/index.asp
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ibragimov, Rustam, 2007. "EFFICIENCY OF LINEAR ESTIMATORS UNDER HEAVY-TAILEDNESS: CONVOLUTIONS OF [alpha]-SYMMETRIC DISTRIBUTIONS," Econometric Theory, Cambridge University Press, vol. 23(03), pages 501-517, June.
- Andrew W. Lo & A. Craig MacKinlay, 1987.
"Stock Market Prices Do Not Follow Random Walks: Evidence From a Simple Specification Test,"
NBER Working Papers
2168, National Bureau of Economic Research, Inc.
- Andrew W. Lo, A. Craig MacKinlay, 1988. "Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 41-66.
- Dimson, Elroy, 1979. "Risk measurement when shares are subject to infrequent trading," Journal of Financial Economics, Elsevier, vol. 7(2), pages 197-226, June.
- Peter C.B. Phillips, 1990.
"A Shortcut to LAD Estimator Asymptotics,"
Cowles Foundation Discussion Papers
949, Cowles Foundation for Research in Economics, Yale University.
- Koenker, Roger & Zhao, Quanshui, 1996. "Conditional Quantile Estimation and Inference for Arch Models," Econometric Theory, Cambridge University Press, vol. 12(05), pages 793-813, December.
- Rogers, Alan J., 2001. "Least Absolute Deviations Regression Under Nonstandard Conditions," Econometric Theory, Cambridge University Press, vol. 17(04), pages 820-852, August.
- Ibragimov, Rustam & Walden, Johan, 2007. "The limits of diversification when losses may be large," Journal of Banking & Finance, Elsevier, vol. 31(8), pages 2551-2569, August.
- Andrew W. Lo & A. Craig MacKinlay, 1989.
"An Econometric Analysis of Nonsynchronous Trading,"
NBER Working Papers
2960, National Bureau of Economic Research, Inc.
- Andrew W. Lo & Craig A. MacKinlay, . "An Econometric Analysis of Nonsyschronous-Trading," Rodney L. White Center for Financial Research Working Papers 19-89, Wharton School Rodney L. White Center for Financial Research.
- Benoit Mandelbrot, 1963. "The Variation of Certain Speculative Prices," The Journal of Business, University of Chicago Press, vol. 36, pages 394.
- Cohen, Kalman J. & Hawawini, Gabriel A. & Maier, Steven F. & Schwartz, Robert A. & Whitcomb, David K., 1983. "Friction in the trading process and the estimation of systematic risk," Journal of Financial Economics, Elsevier, vol. 12(2), pages 263-278, August.
- Rustam Ibragimov, 2005. "On Efficiency of Linear Estimators Under Heavy-Tailedness," Harvard Institute of Economic Research Working Papers 2085, Harvard - Institute of Economic Research.
- Zinde-Walsh, Victoria, 2008. "Kernel Estimation When Density May Not Exist," Econometric Theory, Cambridge University Press, vol. 24(03), pages 696-725, June.
- Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
- Pollard, David, 1991. "Asymptotics for Least Absolute Deviation Regression Estimators," Econometric Theory, Cambridge University Press, vol. 7(02), pages 186-199, June.
- Ibragimov, Rustam & Walden, Johan, 2007. "The limits of diversification when losses may be large," Scholarly Articles 2624460, Harvard University Department of Economics.
- repec:cup:etheor:v:23:y:2007:i:03:p:501-517 is not listed on IDEAS
- Rustam Ibragimov & Johan Walden, 2006. "The Limits of Diversification When Losses May Be Large," Harvard Institute of Economic Research Working Papers 2104, Harvard - Institute of Economic Research.
- Scholes, Myron & Williams, Joseph, 1977. "Estimating betas from nonsynchronous data," Journal of Financial Economics, Elsevier, vol. 5(3), pages 309-327, December.
- Kalman J. Cohen & Gabriel A. Hawawini & Steven F. Maier & Robert A. Schwartz & David K. Whitcomb, 1983. "Estimating and Adjusting for the Intervalling-Effect Bias in Beta," Management Science, INFORMS, vol. 29(1), pages 135-148, January.
When requesting a correction, please mention this item's handle: RePEc:skb:wpaper:cofie-03-2009. 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: (Sim Kee Boon Institute for Financial Economics)
If references are entirely missing, you can add them using this form.