Robust estimation of systematic risk using the t distribution in the chilean stock markets

David Cademartori, Cecilia Romo, Ricardo Campos and Manuel Galea

Applied Economics Letters, 2003, vol. 10, issue 7, 447-453

Abstract: This article deals with the estimate of the systematic risk of a share, assuming that returns follow an independent t distribution. In order to analyse the sensibility to possible outliers and/or atypical returns of the maximum likelihood estimator of the systematic risk, the local influence method was implemented. The results are illustrated by using a set of shares of companies belonging to the Chilean stock market. The main conclusion is that the t model with small degrees of freedom is able to incorporate possible outliers and influential returns in the data.

Date: 2003
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DOI: 10.1080/1350485032000082018A

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