On the distributional characterization of daily log-returns of a world stock index

Kevin Fergusson, Eckhard Platen*

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

36 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)19-38
Number of pages20
JournalApplied Mathematical Finance
Volume13
Issue number1
DOIs
Publication statusPublished - 1 Mar 2006
Externally publishedYes

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