Density forecasting of the Dow Jones share index

Lars-Erik Öller and P Stockhammar

MPRA Paper from University Library of Munich, Germany

Abstract: The distribution of differences in logarithms of the Dow Jones share index is compared to the normal (N), normal mixture (NM) and a weighted sum of a normal and an Assymetric Laplace distribution (NAL). It is found that the NAL fits best. We came to this result by studying samples with high, medium and low volatility, thus circumventing strong heteroscedasticity in the entire series. The NAL distribution also fitted economic growth, thus revealing a new analogy between financial data and real growth.

Keywords: Density forecasting; heteroscedasticity; mixed Normal- Asymmetric Laplace distribution; Method of Moments estimation; connection with economic growth. (search for similar items in EconPapers)
JEL-codes: C20 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-ecm, nep-fmk, nep-for and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:18582

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