Empirical Distributions of Daily Equity Index Returns: A Comparison

Expert Systems with Applications Vol. 54, 2016

Posted: 27 Jun 2015 Last revised: 7 Sep 2017

See all articles by Canan Gunes Corlu

Canan Gunes Corlu

Boston University - Metropolitan College (MET)

Melike Meterelliyoz

TOBB University of Economics and Technology - Department of Business Administration

Murat Tiniç

Kadir Has University

Date Written: November 11, 2015

Abstract

The normality assumption concerning the distribution of equity returns has long been challenged both empirically and theoretically. Alternative distributions have been proposed to better capture the characteristics of equity return data. This paper investigates the ability of five alternative distributions to represent the behavior of daily equity index returns over the period 1979–2014: the skewed Student-t distribution, the generalized lambda distribution, Johnson system of distributions, the normal inverse Gaussian distribution, and the g-and-h distribution. We find that the generalized lambda distribution is a prominent alternative for modeling the behavior of daily equity index returns.

Keywords: Index returns, generalized lambda, Johnson translation system, skewed-t, normal inverse gaussian, g-and-h

Suggested Citation

Gunes Corlu, Canan and Meterelliyoz, Melike and Tiniç, Murat, Empirical Distributions of Daily Equity Index Returns: A Comparison (November 11, 2015). Expert Systems with Applications Vol. 54, 2016. Available at SSRN: https://ssrn.com/abstract=2622672 or http://dx.doi.org/10.2139/ssrn.2622672

Canan Gunes Corlu (Contact Author)

Boston University - Metropolitan College (MET) ( email )

United States

Melike Meterelliyoz

TOBB University of Economics and Technology - Department of Business Administration ( email )

Ankara
Turkey

Murat Tiniç

Kadir Has University ( email )

Istanbul
Turkey

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