Infinite Density at the Median and the Typical Shape of Stock Return Distributions

Peter Phillips, Jin Seo Cho () and Chirok Han Author Email:
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Chirok Han Author Email:: Korea University

Working Papers from Singapore Management University, Sim Kee Boon Institute for Financial Economics

Abstract: Statistics are developed to test for the presence of an asymptotic discontinuity (or infinite density or peakedness) in a probability density at the median. The approach makes use of work by Knight (1998) on L1 estimation asymptotics in conjunction with non-parametric kernel density estimation methods. The size and power of the tests are assessed, and conditions under which the tests have good performance are explored in simulations. The new methods are applied to stock returns of leading companies across major U.S. industry groups. The results confirm the presence of infinite density at the median as a new significant empirical evidence for stock return distributions.

Keywords: Asymptotic leptokurtosis; Infinite density at the median; Least absolute deviations; Kernel density estimation; Stock returns; Stylized facts. (search for similar items in EconPapers)
JEL-codes: C12 G11 (search for similar items in EconPapers)
Pages: 32 Pages
Date: 2009-04
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Published in SMU-SKBI CoFie Working Paper

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http://www.smu.edu.sg/institutes/skbife/downloads/ ... %20Distributions.pdf

Related works:
Journal Article: Infinite Density at the Median and the Typical Shape of Stock Return Distributions (2011)
Journal Article: Infinite Density at the Median and the Typical Shape of Stock Return Distributions (2011)
Working Paper: Infinite Density at the Median and the Typical Shape of Stock Return Distributions (2009)
Working Paper: Infinite Density at the Median and the Typical Shape of Stock Return Distributions (2009)
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