Maximum Likelihood Estimates of Regression Coefficients with alpha-stable residuals and Day of Week effects in Total Returns on Equity Indices

John Frain ()

Economic Papers from Trinity College Dublin, Economics Department

Abstract: This Paper summarizes the theory of Maximum Likelihood Estimation of regressions with alpha-stable residuals. Day of week effects in returns on equity indices, adjusted for dividends (total returns) are estimated and tested using this and traditional OLS methodology. I find that the alpha-stable methodology is feasible. There are some differences in the results from the two methodologies. The conclusion remains that if individual coefficients are of interest and the residuals have fat tails and a possible alpha-stable distribution, the results can be checked for robustness using methods such as those employed here.

Keywords: alpha stable distribution; regression; day of week effects (search for similar items in EconPapers)
JEL-codes: C13 C16 C46 G12 G14 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2008-05, Revised 2008-05
New Economics Papers: this item is included in nep-ecm and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduee:tep0108

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