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Statistical modelling of asymmetric risk in asset returns

John Knight, S. E. Satchell and Kien Tran ()

Applied Mathematical Finance, 1995, vol. 2, issue 3, 155-172

Abstract: The purpose of this article is to provide a straightforward model for asset returns which captures the fundamental asymmetry in upward versus downward returns. We model this feature by using scale gamma distributions for the conditional distributions of positive and negative returns. By allowing the parameters for positive returns to differ from parameters for negative returns we can test the hypothesis of symmetry. Some applications of this process to expected utility and semi-variance calculations are considered. Finally we estimate the model using daily UK FT100 index and Futures data.

Keywords: asymmetric returns; FT 100; semi-variance; scale gamma distribution (search for similar items in EconPapers)
Date: 1995
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Working Paper: Statistical Modeling of Asymetric Risk in Asset Returns (1995)
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DOI: 10.1080/13504869500000009

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