TY - JOUR
T1 - The theory of geometric stable distributions and its use in modeling financial data
AU - Kozubowski, Tomasz J.
AU - Rachev, Svetlozar T.
N1 - Funding Information:
* Research supported in part by NSF, Grant DMS-9103452 and NATO, Grant CRG900798. Correspondence to: Prof. S.T. Rachev, Department of Statistics and Applied Probability, University of California at Santa Barbara, Santa Barbara, CA, 93106, USA.
PY - 1994/4/28
Y1 - 1994/4/28
N2 - It is commonly accepted that stable distributions do provide useful models for asset returns. To accomodate the possibility of market crashes, we preserve the stability of stock price changes up to a random time T, geometrically distributed. T is viewed as a moment of extreme change of the fundamentals of a financial asset. This leads to the class of geometric stable laws, partially studied by Mittnik and Rachev. Using the Yen exchange rates data, we empirically compare several distributions and find that the geometric stable distributions dominate all other models considered, including stable laws.
AB - It is commonly accepted that stable distributions do provide useful models for asset returns. To accomodate the possibility of market crashes, we preserve the stability of stock price changes up to a random time T, geometrically distributed. T is viewed as a moment of extreme change of the fundamentals of a financial asset. This leads to the class of geometric stable laws, partially studied by Mittnik and Rachev. Using the Yen exchange rates data, we empirically compare several distributions and find that the geometric stable distributions dominate all other models considered, including stable laws.
KW - Economics
KW - Financial data
KW - Geometric stable laws
KW - Probability distributions
UR - http://www.scopus.com/inward/record.url?scp=0028405668&partnerID=8YFLogxK
U2 - 10.1016/0377-2217(94)90099-X
DO - 10.1016/0377-2217(94)90099-X
M3 - Article
AN - SCOPUS:0028405668
SN - 0377-2217
VL - 74
SP - 310
EP - 324
JO - European Journal of Operational Research
JF - European Journal of Operational Research
IS - 2
ER -