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Non-Extensitivity versus informative moments for financial models: a unifying framework and empirical results

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  • Herrmann, Klaus

Abstract

Information-theoretic approaches still play a minor role in financial market analysis. Nonetheless, there have been two very similar approaches evolving during the last years, one in so-called econophysics and the other in econometrics. Both generalize the notion of GARCH processes in an information-theoretic sense and are able to capture skewness and kurtosis better than traditional models. In this article we present both approaches in a more general framework and compare their performance in some illustrative data sets.

Suggested Citation

  • Herrmann, Klaus, 2009. "Non-Extensitivity versus informative moments for financial models: a unifying framework and empirical results," FAU Discussion Papers in Economics 07/2009, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
  • Handle: RePEc:zbw:iwqwdp:072009
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    Keywords

    Entropy density; Skewness; Kurtosis; GARCH;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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