Modeling Chinese stock returns with stable distribution

In this paper we demonstrate that an α -stable distribution is better fitted to Chinese stock return data in the Shanghai Composite Index and the Shenzhen Component Index than the classical Black–Scholes model. The sample quantile method developed by McCulloch [J.H. McCulloch, Simple consistent esti...

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Veröffentlicht in:Mathematical and computer modelling Jg. 54; H. 1; S. 610 - 617
Hauptverfasser: Xu, Weidong, Wu, Chongfeng, Dong, Yucheng, Xiao, Weilin
Format: Journal Article
Sprache:Englisch
Veröffentlicht: Kidlington Elsevier Ltd 01.07.2011
Elsevier
Schlagworte:
Characteristic function
China
costs and returns
Exact sciences and technology
Lévy measure
Mathematical analysis
Mathematics
Methods of scientific computing (including symbolic computation, algebraic computation)
Numerical analysis
Numerical analysis. Scientific computation
Numerical methods in probability and statistics
Sample quantile method
Sciences and techniques of general use
Stable distribution
China
Characteristic function
Sample quantile method
Lévy measure
Stable distribution
Applied mathematics
Levy measure
Distribution function
Probability
Stable law
Mathematical model
Computing method
Computer aided analysis
ISSN:0895-7177, 1872-9479
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Zusammenfassung:In this paper we demonstrate that an α -stable distribution is better fitted to Chinese stock return data in the Shanghai Composite Index and the Shenzhen Component Index than the classical Black–Scholes model. The sample quantile method developed by McCulloch [J.H. McCulloch, Simple consistent estimators of stable distribution parameters, Communications in Statistics-Simulation and Computation 15 (4) (1986) 1109–1136] is used to estimate the α -stable distribution for the Shanghai Composite Index and the Shenzhen Component Index. The empirical results show that the asymmetric leptokurtic features presented in the Shanghai Composite Index and Shenzhen Component Index returns can be captured by an α -stable law.
Bibliographie:ObjectType-Article-1
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ISSN:0895-7177
1872-9479
DOI:10.1016/j.mcm.2011.03.004