The Behavior of Stock Returns: Is It Stationary or Evolutionary?

D. A. Hsu

Journal of Financial and Quantitative Analysis, 1984, vol. 19, issue 1, 11-28

Abstract: Empirical studies of the behavior of stock returns are important for several reasons. First, the nature of stock return behavior is fundamental to the formulation of the concept of “risk” (or “uncertainty”) in various financial theories and models. Second, the measurement of risk depends heavily on properties (such as the stationarity, long-tailedness, finiteness of the second and higher moments, etc.) of empirical stock return distributions. Third, various tests for the empirical validity of financial models [28] and the applications of these models (e.g., to the evaluation of investment performances [21], [22]) rely to a considerable extent on the steadiness over time of stock return distributions and the constancy of systematic risk. Fourth, several important pricing models for stock options, warrants, convertible debentures, and other similar financial instruments usually require explicit estimates of stock return variances [5]; the usefulness of such models depends largely on the adequacy (e.g., the finiteness, accuracy, etc.) and the stationarity of the variance measurements.

Date: 1984
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:19:y:1984:i:01:p:11-28_01

Access Statistics for this article

More articles in Journal of Financial and Quantitative Analysis from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().