Modeling Fat Tails In Stock Returns
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Modeling Fat Tails In Stock Returns
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Author : Matteo Bonato
language : en
Publisher:
Release Date : 2009
Modeling Fat Tails In Stock Returns written by Matteo Bonato and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
In this paper a new multivariate volatility model is proposed. It combines the appealing properties of the stable Paretian distribution to model the heavy tails with the GARCH model to capture the volatility clustering. We assume that multivariate asset-returns of financial stocks follow a sub-Gaussian distribution, which is a particular multivariate stable distribution. In this way the characteristic function of the fitted returns has a tractable expression and the density function can be recovered by numerical methods. A multivariate GARCH structure is then adopted to model the covariance matrix of the Gaussian vectors underlying the sub-Gaussian system. The model is applied to a bivariate series of daily U.S. stock returns. Value-at-Risk for long and short positions is computed and compared with the one obtained using the multivariate normal and the multivariate Student's t distribution. Finally, exploiting the recent developments in the vast dimensional time-varying covariances modeling, possible feasible extensions to higher dimensions are suggested and an illustrative example using the Dow Jones index components is presented.
Fat Tailed And Skewed Asset Return Distributions
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Author : Svetlozar T. Rachev
language : en
Publisher: Wiley
Release Date : 2005-09-15
Fat Tailed And Skewed Asset Return Distributions written by Svetlozar T. Rachev and has been published by Wiley this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005-09-15 with Business & Economics categories.
While mainstream financial theories and applications assume that asset returns are normally distributed, overwhelming empirical evidence shows otherwise. Yet many professionals don’t appreciate the highly statistical models that take this empirical evidence into consideration. Fat-Tailed and Skewed Asset Return Distributions examines this dilemma and offers readers a less technical look at how portfolio selection, risk management, and option pricing modeling should and can be undertaken when the assumption of a non-normal distribution for asset returns is violated. Topics covered in this comprehensive book include an extensive discussion of probability distributions, estimating probability distributions, portfolio selection, alternative risk measures, and much more. Fat-Tailed and Skewed Asset Return Distributions provides a bridge between the highly technical theory of statistical distributional analysis, stochastic processes, and econometrics of financial returns and real-world risk management and investments.
Modelling Fat Tails In Stock Market Index Returns
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Author : Franziska Rüdele
language : en
Publisher:
Release Date : 2012
Modelling Fat Tails In Stock Market Index Returns written by Franziska Rüdele and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
Modelling The Fat Tail Distribution Of Security Market Returns
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Author : Chun-Sun Choi
language : en
Publisher: Open Dissertation Press
Release Date : 2017-01-27
Modelling The Fat Tail Distribution Of Security Market Returns written by Chun-Sun Choi and has been published by Open Dissertation Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-01-27 with categories.
This dissertation, "Modelling the Fat Tail Distribution of Security Market Returns" by Chun-sun, Choi, 蔡進晨, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. DOI: 10.5353/th_b3197577 Subjects: Stock exchanges - China - Hong Kong - Statistical methods Distribution (Probability theory) Stock exchanges - Statistical methods
A Stochastic Volatility Model With Fat Tails Skewness And Leverage Effects
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Author : Daniel R. Smith
language : en
Publisher:
Release Date : 2007
A Stochastic Volatility Model With Fat Tails Skewness And Leverage Effects written by Daniel R. Smith and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
We develop a new stochastic volatility model that captures the three most important features of stock index returns: negative correlation between returns and future volatility, excess kurtosis and negative skewness. We estimate the model parameters by maximum likelihood using a numerical integration-based filter to deal with the latent nature of volatility. In this approach different models are defined by varying the joint density of returns and future volatility conditional on current volatility. Our innovation is to construct the joint conditional density using a copula. This approach is tremendously flexible and allows the econometrician to choose the marginal distribution of both returns and volatility independently and then stitch them together using a copula, which is also chosen independently, to form the joint density. We also develop conditional moment-based model specification tests for the extent to which the various stochastic volatility models are able to capture the skewness and excess kurtosis we observe in practice. The parameter estimates and conditional moment tests indicate that leverage effects, excess kurtosis and skewness are all crucial for modeling stock returns.
Applications Of Fat Tail Distributions In Analyzing Stock Returns
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Author : Ah Hin Pooi
language : en
Publisher:
Release Date : 2006
Applications Of Fat Tail Distributions In Analyzing Stock Returns written by Ah Hin Pooi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Rate of return categories.
Complex Systems In Finance And Econometrics
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Author : Robert A. Meyers
language : en
Publisher: Springer Science & Business Media
Release Date : 2010-11-03
Complex Systems In Finance And Econometrics written by Robert A. Meyers and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-11-03 with Business & Economics categories.
Finance, Econometrics and System Dynamics presents an overview of the concepts and tools for analyzing complex systems in a wide range of fields. The text integrates complexity with deterministic equations and concepts from real world examples, and appeals to a broad audience.
Handbook Of Financial Econometrics And Statistics
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Author : Cheng-Few Lee
language : en
Publisher: Springer
Release Date : 2014-09-28
Handbook Of Financial Econometrics And Statistics written by Cheng-Few Lee and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-09-28 with Business & Economics categories.
The Handbook of Financial Econometrics and Statistics provides, in four volumes and over 100 chapters, a comprehensive overview of the primary methodologies in econometrics and statistics as applied to financial research. Including overviews of key concepts by the editors and in-depth contributions from leading scholars around the world, the Handbook is the definitive resource for both classic and cutting-edge theories, policies, and analytical techniques in the field. Volume 1 (Parts I and II) covers all of the essential theoretical and empirical approaches. Volumes 2, 3, and 4 feature contributed entries that showcase the application of financial econometrics and statistics to such topics as asset pricing, investment and portfolio research, option pricing, mutual funds, and financial accounting research. Throughout, the Handbook offers illustrative case examples and applications, worked equations, and extensive references, and includes both subject and author indices.
On The Economic Value Of Modeling Fat Tails
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Author : Prasad V. Bidarkota
language : en
Publisher:
Release Date : 2003
On The Economic Value Of Modeling Fat Tails written by Prasad V. Bidarkota and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with categories.
We investigate the impact of modeling fat tails observed in the empirical distributions of macroeconomic time series on the implications of theoretical macroeconomic models. We study this issue in the context of the widely used consumption-based asset-pricing model. We derive exact analytical solutions to bond prices and risk premiums on forward prices and holding period returns in this model, assuming that the endowment evolves as a stochastic process with innovations drawn alternatively from fat-tailed and Gaussian distributions. We calculate and compare the implied risk premiums for suitable parameterizations of the two versions of the model.
Herd Behavior And Fat Tails In Financial Markets
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Author : Makoto Nirei
language : en
Publisher:
Release Date : 2006
Herd Behavior And Fat Tails In Financial Markets written by Makoto Nirei and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
This paper demonstrates that a generic herd behavior model generates a fat-tailed distribution of traders' aggregate actions. We consider a simultaneous-move game of traders who infer other traders' private information on the value of assets by observing their actions and decide whether to buy the asset or not. The number of buying actions in a Bayesian Nash equilibrium is characterized by a sum of a binomial process by introducing a fictitious tatonnement. Under a broad class of distributions for the private information, we show that the aggregate actions follow a power-law distribution with an exponential truncation. The empirical distribution of the daily returns of Samp;P 500 stocks is fitted by the model prediction, when the aggregate actions are translated into price movements either by an empirical volume-price impact function or by a market-maker who sets the price by incorporating the available information. This model nests the benchmark herd behavior model and the recent models of critical phenomena in the network of traders. The latter showed that the aggregate actions follow a power-law tailed distribution when the connectivity of networked traders is set at a critical level. In this context, we provide an economic reason why at all the rational herding behavior exhibits criticality in a general setting. Suppose that a good private information leads a trader to buy, whereas the other traders do not buy despite their observation of the action. Then their inactions reveal their private information partially. The total impact of the action on the revealed information is thus of order 1/N, where N is the total number of traders, if the private information is equally informative across the traders. When this is the case, the mean impact of the initial action on the other actions is roughly equal to one. The tatonnement triggered by the initial action becomes a martingale, in which the distribution of the total number of buying actions during the tatonnement exhibits a power-law tail. We further show that, when the static game is repeated over time, the triggering action almost surely occurs and the mean impact of the action in the chain reaction evolves toward the critical level. This implies that the rational learning of traders self-organizes their beliefs to the critical state at which a power-law clustering of actions emerges.