On the Distributional Characterization of Daily Log-Returns of a World Stock Index

Kevin Fergusson and Eckhard Platen ()

Applied Mathematical Finance, 2006, vol. 13, issue 1, 19-38

Abstract: In this paper distributions are identified which suitably fit log-returns of the world stock index when these are expressed in units of different currencies. By searching for a best fit in the class of symmetric generalized hyperbolic distributions the maximum likelihood estimates appear to cluster in the neighbourhood of those of the Student t distribution. This is confirmed at a high significance level under the likelihood ratio test. Finally, the paper derives the minimal market model, which explains the empirical findings as a consequence of the optimal market dynamics.

Keywords: World stock index; log-return distribution; Student t distribution; symmetric generalized hyperbolic distribution (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (32)

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DOI: 10.1080/13504860500394052

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