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Homogeneity tests for Levy processes and applications

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  • Ciuiu, Daniel

Abstract

In this paper we will check the homogeneity/heterogeneity of Levy processes using some non-parametric homogeneity tests. First we create two samples from two Levy processes starting from the definition of the Levy process, and next we test if the two samples have the same distribution. Using the Levy—Ito decomposition we will perform the homogeneity tests for given parts of the Levi processes. The study of the homogeneity of stock markets shocks is usefull because the eventualy homogeneity can produce a phenomenon analogue to the resonance that can be observed in mechanics. This resonance increase the idiosyncratic risk.

Suggested Citation

  • Ciuiu, Daniel, 2011. "Homogeneity tests for Levy processes and applications," MPRA Paper 36457, University Library of Munich, Germany, revised Nov 2011.
    • Handle: RePEc:pra:mprapa:36457
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    File URL: https://mpra.ub.uni-muenchen.de/36457/1/MPRA_paper_36457.pdf
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    References listed on IDEAS

    as
    1. Amit Goyal & Pedro Santa-Clara, 2003. "Idiosyncratic Risk Matters!," Journal of Finance, American Finance Association, vol. 58(3), pages 975-1008, June.
    2. Helyette Geman & Dilip B. Madan & Marc Yor, 2001. "Asset Prices Are Brownian Motion: Only In Business Time," World Scientific Book Chapters, in: Marco Avellaneda (ed.), Quantitative Analysis In Financial Markets Collected Papers of the New York University Mathematical Finance Seminar(Volume II), chapter 4, pages 103-146, World Scientific Publishing Co. Pte. Ltd..
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    More about this item

    Keywords

    Levy processes; jump processes; homogeneity tests; idiosyncratic risk;
    All these keywords.

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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