Download or read book Essays on Modeling Asymmetric and Leptokurtic Distributions of Asset Returns written by Pilsun Choi and published by . This book was released on 2002 with total page 176 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Fat Tailed and Skewed Asset Return Distributions written by Svetlozar T. Rachev and published by John Wiley & Sons. This book was released on 2005-09-15 with total page 385 pages. Available in PDF, EPUB and Kindle. Book excerpt: While mainstream financial theories and applications assume that asset returns are normally distributed, overwhelming empirical evidence shows otherwise. Yet many professionals don’t appreciate the highly statistical models that take this empirical evidence into consideration. Fat-Tailed and Skewed Asset Return Distributions examines this dilemma and offers readers a less technical look at how portfolio selection, risk management, and option pricing modeling should and can be undertaken when the assumption of a non-normal distribution for asset returns is violated. Topics covered in this comprehensive book include an extensive discussion of probability distributions, estimating probability distributions, portfolio selection, alternative risk measures, and much more. Fat-Tailed and Skewed Asset Return Distributions provides a bridge between the highly technical theory of statistical distributional analysis, stochastic processes, and econometrics of financial returns and real-world risk management and investments.

Download or read book Modeling Asymmetry and Excess Kurtosis in Stock Return Data written by Gamini Premaratne and published by . This book was released on 2000 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book A Comparison of Mixed Garch Jump Models with Skewed T Distribution for Asset Returns written by Jung-Suk Yu and published by . This book was released on 2005 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates whether alternative return distributions such as Hansen's skewed t-distribution combined with similar GARCH specifications can outperform mixed GARCH-jump models. More specifically, this study questions if complicated jumps specification such as Maheu and McCurdy (2004)'s GARJI model can provide a better fit to the empirical distribution of the data. We find that more parsimonious GJR-HT model is superior to mixed GARCH-jump models. Likelihood-ratio tests, information criteria and Value-at-Risk (VaR) analysis confirm that GJR-HT is the most suitable model specification which gives us both better fit to the data and parsimony of parameterization. The benefits of estimating GARCH models using asymmetric leptokurtic distributions are more substantial for highly volatile series such as emerging stock markets, which have a higher degree of non-normality. Furthermore, Hansen's skewed t-distribution also provides us with an excellent risk management tool evidenced by VaR analysis.

Download or read book Dissertation Abstracts International written by and published by . This book was released on 2008 with total page 672 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Fine Structure of Asset Returns Jumps and Stochastic Volatility written by . Jung-Suk Yu and published by LAP Lambert Academic Publishing. This book was released on 2013 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt: The various models have been built upon pioneering work of Robert F. Engle (2003) and Robert C. Merton (1997) for methods of analyzing economic time series with time-varying volatility and a new method to determine the value of derivatives, respectively. This book fills the gaps which Harry M. Markowitz's (1990) mean-variance analysis fails to capture. Especially, this book investigates dynamic processes of asset returns, volatility, and jumps which are time-varying and stochastic in discrete- and continuous-time settings. I demonstrate that these additional computational and modeling efforts provide us with significant benefits to better capture actual financial time-series data and to reduce option pricing errors. If we only consider mean and variance as in Markowitz, most likely we may not fully appreciate recent advances in risk managements, investments, and derivatives pricing since many researchers recognize the importance of economic and statistical roles of skewness and kurtosis. To better explain well-known skewness and excess kurtosis of financial time-series returns, I employ asymmetric fat-tailed distributions such as Hansen's skewed t-distribution and Levy jump models.

Download or read book Multi moment Asset Allocation and Pricing Models written by Emmanuel Jurczenko and published by John Wiley & Sons. This book was released on 2006-10-02 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt: While mainstream financial theories and applications assume that asset returns are normally distributed and individual preferences are quadratic, the overwhelming empirical evidence shows otherwise. Indeed, most of the asset returns exhibit “fat-tails” distributions and investors exhibit asymmetric preferences. These empirical findings lead to the development of a new area of research dedicated to the introduction of higher order moments in portfolio theory and asset pricing models. Multi-moment asset pricing is a revolutionary new way of modeling time series in finance which allows various degrees of long-term memory to be generated. It allows risk and prices of risk to vary through time enabling the accurate valuation of long-lived assets. This book presents the state-of-the art in multi-moment asset allocation and pricing models and provides many new developments in a single volume, collecting in a unified framework theoretical results and applications previously scattered throughout the financial literature. The topics covered in this comprehensive volume include: four-moment individual risk preferences, mathematics of the multi-moment efficient frontier, coherent asymmetric risks measures, hedge funds asset allocation under higher moments, time-varying specifications of (co)moments and multi-moment asset pricing models with homogeneous and heterogeneous agents. Written by leading academics, Multi-moment Asset Allocation and Pricing Models offers a unique opportunity to explore the latest findings in this new field of research.

Download or read book Financial Modeling Under Non Gaussian Distributions written by Eric Jondeau and published by Springer Science & Business Media. This book was released on 2007-04-05 with total page 541 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book examines non-Gaussian distributions. It addresses the causes and consequences of non-normality and time dependency in both asset returns and option prices. The book is written for non-mathematicians who want to model financial market prices so the emphasis throughout is on practice. There are abundant empirical illustrations of the models and techniques described, many of which could be equally applied to other financial time series.

Download or read book Modeling Asymmetry and Excess Kurtosis in Stock Return Data written by Gamini Premaratne and published by . This book was released on 2000 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on Modeling Stock Returns Empirical Analysis of the Residual Distribution Risk return Relation and Stock bond Dynamic Correlation written by Jiandong Li and published by . This book was released on 2007 with total page 136 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies the following issues: the presence of non-normal distribution features and the significance of higher order moments, the tradeoff between risk and return, and the dynamic conditional correlation between stock returns and bond returns. These issues are structured into three essays.

Download or read book Essays on Volatility Risk Asset Returns and Consumption based Asset Pricing written by Young Il Kim and published by . This book was released on 2008 with total page 176 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: My dissertation addresses two main issues regarding asset returns: econometric modeling of asset returns in chapters 2 and 3 and puzzling features of the standard consumption-based asset pricing model (C-CAPM) in chapters 4 and 5. Chapter 2 develops a new theoretical derivation for the GARCH-skew-t model as a mixture distribution of normal and inverted-chi-square in order to represent the three important stylized facts of financial data: volatility clustering, skewness and thick-tails. The GARCH-skew-t is same as the GARCH-t model if the skewness parameter is shut-off. The GARCH-skew-t is applied to U.S. excess stock market returns, and the equity premium is computed based on the estimated model. It is shown that skewness and kurtosis can have significant effect on the equity premium and that with sufficiently negatively skewed distribution of the excess returns, a finite equity premium can be assured, contrary to the case of the Student t in which an infinite equity premium arises. Chapter 3 provides a new empirical guidance for modeling a skewed and thick-tailed error distribution along with GARCH effects based on the theoretical derivation for the GARCH-skew-t model and empirical findings on the Realized Volatility (RV) measure, constructed from the summation of higher frequency squared (demeaned) returns. Based on an 80-year sample of U.S. daily stock market returns, it is found that the distribution of monthly RV conditional on past returns is approximately the inverted-chi-square while monthly market returns, conditional on RV and past returns are normally distributed with RV in both mean and variance. These empirical findings serve as the building blocks underlying the GARCH-skew-t model. Thus, the findings provide a new empirical justification for the GARCH-skew-t modeling of equity returns. Moreover, the implied GARCH-skew-t model accurately represents the three important stylized facts for equity returns. Chapter 4 provides a possible solution to asset return puzzles such as high equity premium and low riskfree rate based on parameter uncertainty. It is shown that parameter uncertainty underlying the data generating process can lead to a negatively skewed and thick-tailed distribution that can explain most of the high equity premium and low riskfree rate even with the degree of risk aversion below 10 in the CRRA utility function. Chapter 5 investigates a possible link between stock market volatility and macroeconomic risk. This chapter studies why U.S. stock market volatility has not changed much during the "great moderation" era of the 1980s in contrast to the prediction made by the standard C-CAPM. A new model is developed such that aggregate consumption is decomposed into stock and non-stock source of income so that stock dividends are a small part of consumption. This new model predicts that the great moderation of macroeconomic risk must have originated from declining volatility of shocks to the relatively large non-stock factor of production while shocks to the relatively small stock assets have been persistently volatile during the moderation era. Furthermore, the model shows that the systematic risk of holding equity is positively associated with the stock share of total wealth.

Download or read book Symmetric and Asymmetric Distributions written by Emilio Gómez Déniz and published by MDPI. This book was released on 2021-01-21 with total page 146 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years, the advances and abilities of computer software have substantially increased the number of scientific publications that seek to introduce new probabilistic modelling frameworks, including continuous and discrete approaches, and univariate and multivariate models. Many of these theoretical and applied statistical works are related to distributions that try to break the symmetry of the normal distribution and other similar symmetric models, mainly using Azzalini's scheme. This strategy uses a symmetric distribution as a baseline case, then an extra parameter is added to the parent model to control the skewness of the new family of probability distributions. The most widespread and popular model is the one based on the normal distribution that produces the skewed normal distribution. In this Special Issue on symmetric and asymmetric distributions, works related to this topic are presented, as well as theoretical and applied proposals that have connections with and implications for this topic. Immediate applications of this line of work include different scenarios such as economics, environmental sciences, biometrics, engineering, health, etc. This Special Issue comprises nine works that follow this methodology derived using a simple process while retaining the rigor that the subject deserves. Readers of this Issue will surely find future lines of work that will enable them to achieve fruitful research results.

Download or read book Modeling Asymmetry and Excess Kurtosis in Stock Return Data written by Gamini Premaratne and published by . This book was released on 2000 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Return Distributions in Finance written by Stephen Satchell and published by Elsevier. This book was released on 2000-12-08 with total page 329 pages. Available in PDF, EPUB and Kindle. Book excerpt: Quantitative methods have revolutionised the area of trading, regulation, risk management, portfolio construction, asset pricing and treasury activities, and governmental activity such as central banking. One of the original contributions in this area is the classic by Cootner entitled 'The Random Nature of Stock Market Prices'. This work investigated the statistical properties of asset prices and was one of the first works to investigate this area in a rigorous manner. Much has happened in this field in the last 35 years and 'Return Distributions in Finance' contains much new information that reflects this huge growth. The authors combined experience reflects not only the new theory but also the new practice in this fascinating area. The rise of financial engineering now allows us to change the nature of asset returns to whatever pattern we desire, albeit at a cost. Benefits and costs can only be understood if we understand the underlying processes. 'Return Distributions in Finance' allows us to gain that understanding. Assists in understanding asset return distributions Provides a full overview of financial risk management techniques in asset allocation Demonstrates how to use asset return forecast applications

Download or read book American Doctoral Dissertations written by and published by . This book was released on 2002 with total page 776 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Caught Up in the Higher Moments written by Ronald Jared DeLisle and published by . This book was released on 2010 with total page 100 pages. Available in PDF, EPUB and Kindle. Book excerpt: ABSTRACT: This dissertation examines if information extracted from the options markets is priced in the cross-section of equity returns and whether or not this information is a systematic risk factor. Several versions of the Intertemporal Capital Asset Pricing Model predict that changes in aggregate volatility are priced into the cross-section of stock returns. Literature confirms that changes in expected future market volatility are priced into the cross-section of stock returns. Several of these studies use the VIX Index as proxy for future market volatility, and suggest that it is a risk factor. However, prior studies do not test whether asymmetric volatility affects if firm sensitivity to changes in VIX is related to risk, or is just a characteristic uniformly affecting all firms. The first chapter of my dissertation examines the asymmetric relation of stock returns and changes in VIX. The study finds that sensitivity to VIX innovations affects returns when volatility is rising, but not when it is falling. When VIX rises this sensitivity is a priced risk factor, but when it falls there is a positive impact on all stocks irrespective of VIX loadings. The second essay of my dissertation uses the second, third, and fourth moments of the risk-neutral density extracted from options on the S & P 500 as the proxy for changes in the expected future market return distribution rather than just the VIX index. The VIX index, while easily obtained, contains limited information due to its construction. The risk-neutral moments map one-to-one to the real-world volatility smile from market options, and contain all the information in the cross-section of market option moneyness and provide a richer proxy for changes in expected future market return distribution. The analyses find that positive change in risk-neutral skewness is a risk-factor and that change in risk-neutral kurtosis is not. The evidence for change in risk-neutral volatility being a risk factor, however, is ambiguous.

Download or read book Three Essays on Econometrics written by Shiliang Li and published by . This book was released on 2011 with total page 89 pages. Available in PDF, EPUB and Kindle. Book excerpt: The dissertation consists of three independent essays, and they are put in as three chapters. The goal of the first chapter is to develop an estimation procedure for financial time series models with the error terms following the Asymmetric Exponential Power Distribution (AEPD). The AEPD is the most general class of unimodal distributions. In addition to the usual location and scale parameters, it has skewness and kurtosis parameters. The kurtosis parameter is hard to estimate when the sample size is small and skewness is large. We show that when the skewness parameter is either close to zero or close to one the estimation of the kurtosis parameters are virtually unidentifiable unless the sample size is large. We analyze the nonlinear GARCH model (NGARCH) and an asset pricing model known as CKLS. We devise Bayesian Markov chain Monte Carlo (MCMC) algorithms. In chapter 2, we focus on econometric computation and develop a method to speed up intensive computation. The combination of MATLAB, C/C++ and Graphic Processing Unit (GPU) is a method to put convenience and speed together. MATLAB is a high level computing language for econometrics. C/C++ language, on the other hand, is more flexible and more powerful than interpreted languages such as GAUSS, MATLAB and SAS. But it requires more professional programming skills. There are three levels of speedup (within one personal computer). The lowest is simple C++ substitution. The faster level is parallel computing using multicore CPU. The fastest speed-up is parallel computing using GPU cards. The compiled codes which use GPU can run in MATLAB hundreds time faster than corresponding MATLAB script functions. In chapter 3, we focus on the estimation of the multifactor CKLS model. The CKLS model provides a simple econometric framework to nest some popular term structure models such as the ones proposed by Merton (1973), Vasicek (1977), and Cox, Ingasol and Ross (CIR) (1985). In this chapter, we provide a new MCMC algorithm to estimate the multifactor CKLS model. Compared to the algorithm in Sowar (2005), our algorithm is more efficient andcan be applied to multifactor models whose dimension is more than two.