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An Empirical Examination of Daily Stock Return Distributions for U.S. Stocks

  • Svetlozar T. Rachev
  • Stoyan V. Stoyanov
  • Almira Biglova
  • Frank J. Fabozzi
Part of the Studies in Classification, Data Analysis, and Knowledge Organization book series (STUDIES CLASS)

Abstract

This article investigates whether the Gaussian distribution hypothesis holds 382 U.S. stocks and compares it to the stable Paretian hypothesis. The daily returns are examined in the framework of two probability models - the homoskedastic independent, identical distributed model and the conditional heteroskedastic ARMA-GARCH model. Consistent with other studies, we strongly reject the Gaussian hypothesis for both models. We find out that the stable Paretian hypothesis better explains the tails and the central part of the return distribution.

Keywords

Asset Return GARCH Model Stable Distribution Return Distribution Empirical Examination 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin · Heidelberg 2005

Authors and Affiliations

  • Svetlozar T. Rachev
    • 1
    • 2
  • Stoyan V. Stoyanov
    • 3
  • Almira Biglova
    • 1
  • Frank J. Fabozzi
    • 4
  1. 1.Department of Econometrics, Statistics and Mathematical FinanceUniversity of KarlsruheKarlsruheGermany
  2. 2.Department of Statistics and Applied ProbabilityUniversity of CaliforniaSanta BarbaraUSA
  3. 3.FinAnalytica, Inc.SeattleUSA
  4. 4.School of ManagementYale UniversityNew HavenUSA

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