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On the Distributional Characterization of Log-returns of a World Stock Index

In this paper we identify distributions which suitably fit log-returns of the world stock index (WSI) when these are expressed in units of different currencies. By searching for a best fit in the class of symmetric generalized hyperbolic distributions the maximum likelihood estimates appear to cluster in the neighborhood of those of the Student t distribution. This is confirmed on a high significance level under the likelihood ratio test.

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File URL: http://www.business.uts.edu.au/qfrc/research/research_papers/rp153.pdf
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Paper provided by Quantitative Finance Research Centre, University of Technology, Sydney in its series Research Paper Series with number 153.

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Length: 22
Date of creation: 01 Mar 2005
Date of revision:
Handle: RePEc:uts:rpaper:153
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Web page: http://www.qfrc.uts.edu.au/

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  1. Blattberg, Robert C & Gonedes, Nicholas J, 1974. "A Comparison of the Stable and Student Distributions as Statistical Models for Stock Prices," The Journal of Business, University of Chicago Press, vol. 47(2), pages 244-80, April.
  2. Eckhard Platen, 2004. "Diversified Portfolios with Jumps in a Benchmark Framework," Asia-Pacific Financial Markets, Springer, vol. 11(1), pages 1-22, March.
  3. Eckhard Platen & Gerhard Stahl, 2003. "A Structure for General and Specific Market Risk," Computational Statistics, Springer, vol. 18(3), pages 355-373, September.
  4. Panayiotis Theodossiou, 1998. "Financial Data and the Skewed Generalized T Distribution," Management Science, INFORMS, vol. 44(12-Part-1), pages 1650-1661, December.
  5. Eckhard Platen, 2001. "A Minimal Financial Market Model," Research Paper Series 48, Quantitative Finance Research Centre, University of Technology, Sydney.
  6. Eckhard Platen, 2001. "Arbitrage in Continuous Complete Markets," Research Paper Series 72, Quantitative Finance Research Centre, University of Technology, Sydney.
  7. Clark, Peter K, 1973. "A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices," Econometrica, Econometric Society, vol. 41(1), pages 135-55, January.
  8. Long, John Jr., 1990. "The numeraire portfolio," Journal of Financial Economics, Elsevier, vol. 26(1), pages 29-69, July.
  9. Eckhard Platen, 2003. "A Benchmark Framework for Risk Management," Research Paper Series 113, Quantitative Finance Research Centre, University of Technology, Sydney.
  10. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
  11. Eckhard Platen, 2003. "Modeling the Volatility and Expected Value of a Diversified World Index," Research Paper Series 103, Quantitative Finance Research Centre, University of Technology, Sydney.
  12. Praetz, Peter D, 1972. "The Distribution of Share Price Changes," The Journal of Business, University of Chicago Press, vol. 45(1), pages 49-55, January.
  13. Markowitz, Harry M & Usmen, Nilufer, 1996. "The Likelihood of Various Stock Market Return Distributions, Part 1: Principles of Inference," Journal of Risk and Uncertainty, Springer, vol. 13(3), pages 207-19, November.
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