Testing the Multivariate Normality of Australian Stock Returns

Philip Gray, Egon Kalotay and Julie McIvor
Additional contact information
Philip Gray: Australian Graduate School of Management, The University of New South Wales, Sydney NSW 2052; E†mail: pgray@agsm.unsw.edu.au
Egon Kalotay: School of Economic and Financial Studies, Macquarie University, Ryde NSW 2109
Julie McIvor: School of Economics and Finance, Queensland University of Technology, Gardens Point Campus, GPO Box 2434, Brisbane QLD 4001.

Australian Journal of Management, 1998, vol. 23, issue 2, 135-150

Abstract: The multivariate normality of stock returns is a crucial assumption in many tests of assets pricing models. While past Australian research has examined the univariate normality of returns, univariate test statistics are unreliable for testing multivariate normality since they ignore the contemporaneous correlation between asset returns. This paper utilises a multivariate test procedure, based on the generalised method of moments, to test whether residuals from market model regressions are multivariate normal. The results suggest violations of the multivariate normality assumption which cast doubt over the validity over inferential procedures commonly used in the extant empirical literature.

Keywords: MULTIVARIATE NORMALITY; GMM; SKEWNESS; KURTOSIS (search for similar items in EconPapers)
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:23:y:1998:i:2:p:135-150

DOI: 10.1177/031289629802300201

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