The Distribution of Stock Market Returns: 1958-1973

Peter Praetz and Edward J.G. Wilson
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Edward J.G. Wilson: Monash University. Valuable comments from Ray Ball are gratefully acknowledged. Thanks are also due to Philip Brown for the use of Version II of his price relative file.

Australian Journal of Management, 1978, vol. 3, issue 1, 79-90

Abstract: The empirical frequency distributions of continuously-compounded monthly share returns on the Melbourne Stock Exchange over 1958-73 are studied for individual securities and portfolios. The typical distributional shape is observed and the stable Paretian and Student t distributions are fitted to the returns. The latter clearly is superior and even normality is a reasonable approximation for medium sized portfolios. The most likely explanation seems to be non-stationarity in the generating process for returns, rather than infinite-variance distributions or data errors. The implications for future empirical work and the theory of asset pricing are discussed.

Keywords: ASSET-PRICING; KURTOSIS; RETURN DISTRIBUTIONS; SKEWNESS; STOCK MARKET PRICES (search for similar items in EconPapers)
Date: 1978
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:3:y:1978:i:1:p:79-90

DOI: 10.1177/031289627800300106

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