On the distributional characterization of daily log-returns of a world stock index
- Publisher:
- Routledge
- Publication Type:
- Journal Article
- Citation:
- Applied Mathematical Finance, 2006, 13 (1), pp. 19 - 38
- Issue Date:
- 2006-01
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In this paper distributions are identified which suitably fit log-returns of the world stock index 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 neighbourhood of those of the Student t distribution. This is confirmed at a high significance level under the likelihood ratio test. Finally, the paper derives the minimal market model, which explains the empirical findings as a consequence of the optimal market dynamics
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