Empirical Analyses of Industry Stock Index Return Distributions for the Taiwan Stock Exchange

Svetlozar Rachev, Chufang Wu and Frank Fabozzi ()
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Svetlozar Rachev: School of Economics and Business Engineering, University of Karlsruhe
Chufang Wu: Department of Applied Mathematics, National Donghua University of Taiwan

Annals of Economics and Finance, 2007, vol. 8, issue 1, 21-31

Abstract: We study the daily return distributions for 22 industry stock indexes on the Tai-wan Stock Exchange under the unconditional homoskedastic independent, identically distributed and the conditional heteroskedastic GARCH models. Two distribution hypotheses are tested: the Gaussian and the stable Paretian distributions. The performance of the stable Paretian distribution is better than that of the Gaussian distribution. A back-testing example is provided to give evidence on the superiority of the stable ARMA-GARCH to the normal ARMA-GARCH.

Keywords: Stable distributions; ARMA-GARCH; Heavy tails; Volatility clustering; Value at risk (search for similar items in EconPapers)
JEL-codes: C13 G10 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2007:v:8:i:1:p:21-31

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