Empirical analyses of industry stock index return distributions for the Taiwan stock exchange

Svetlozar T. Rachev; Emeritus; Stoyan V. Stoyanov; Chufang Wu; Frank J. Fabozzi

Empirical analyses of industry stock index return distributions for the Taiwan stock exchange

Svetlozar T. Rachev, Emeritus, Stoyan V. Stoyanov, Chufang Wu, Frank J. Fabozzi

Mathematics and Statistics

Research output: Contribution to journal › Article › peer-review

3 Scopus citations

Abstract

We study the daily return distributions for 22 industry stock indexes on the Tai-wan Stock Exchange under the unconditional homoskedastic independent, identically distributed and the conditional heteroskedastic GARCH models. Two distribution hypotheses are tested: the Gaussian and the stable Paretian distributions. The performance of the stable Paretian distribution is better than that of the Gaussian distribution. A back-testing example is provided to give evidence on the superiority of the stable ARMA-GARCH to the normal ARMA-GARCH.

Original language	English
Pages (from-to)	21-31
Number of pages	11
Journal	Annals of Economics and Finance
Volume	8
Issue number	1
State	Published - May 2007

Keywords

ARMA-GARCH
Heavy tails
Stable distributions
Value at risk
Volatility clustering

Cite this

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abstract = "We study the daily return distributions for 22 industry stock indexes on the Tai-wan Stock Exchange under the unconditional homoskedastic independent, identically distributed and the conditional heteroskedastic GARCH models. Two distribution hypotheses are tested: the Gaussian and the stable Paretian distributions. The performance of the stable Paretian distribution is better than that of the Gaussian distribution. A back-testing example is provided to give evidence on the superiority of the stable ARMA-GARCH to the normal ARMA-GARCH.",

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AU - Fabozzi, Frank J.

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AB - We study the daily return distributions for 22 industry stock indexes on the Tai-wan Stock Exchange under the unconditional homoskedastic independent, identically distributed and the conditional heteroskedastic GARCH models. Two distribution hypotheses are tested: the Gaussian and the stable Paretian distributions. The performance of the stable Paretian distribution is better than that of the Gaussian distribution. A back-testing example is provided to give evidence on the superiority of the stable ARMA-GARCH to the normal ARMA-GARCH.

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KW - Heavy tails

KW - Stable distributions

KW - Value at risk

KW - Volatility clustering

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Empirical analyses of industry stock index return distributions for the Taiwan stock exchange

Abstract

Keywords

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