The $κ$-generalised Distribution for Stock Returns
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arXiv
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| Format: | Preprint |
| Published: |
2024
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| _version_ | 1866916249207832576 |
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| author | Forbes, Samuel |
| author_facet | Forbes, Samuel |
| contents | Empirical evidence shows stock returns are often heavy-tailed rather than normally distributed. The $κ$-generalised distribution, originated in the context of statistical physics by Kaniadakis, is characterised by the $κ$-exponential function that is asymptotically exponential for small values and asymptotically power law for large values. This proves to be a useful property and makes it a good candidate distribution for many types of quantities. In this paper we focus on fitting historic daily stock returns for the FTSE 100 and the top 100 Nasdaq stocks. Using a Monte-Carlo goodness of fit test there is evidence that the $κ$-generalised distribution is a good fit for a significant proportion of the 200 stock returns analysed. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2405_09929 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | The $κ$-generalised Distribution for Stock Returns Forbes, Samuel Statistical Finance Applications Empirical evidence shows stock returns are often heavy-tailed rather than normally distributed. The $κ$-generalised distribution, originated in the context of statistical physics by Kaniadakis, is characterised by the $κ$-exponential function that is asymptotically exponential for small values and asymptotically power law for large values. This proves to be a useful property and makes it a good candidate distribution for many types of quantities. In this paper we focus on fitting historic daily stock returns for the FTSE 100 and the top 100 Nasdaq stocks. Using a Monte-Carlo goodness of fit test there is evidence that the $κ$-generalised distribution is a good fit for a significant proportion of the 200 stock returns analysed. |
| title | The $κ$-generalised Distribution for Stock Returns |
| topic | Statistical Finance Applications |
| url | https://arxiv.org/abs/2405.09929 |