Moment Condition Failure Australian Evidence
16 Pages Posted: 5 May 2001
Date Written: undated
This paper examines the existence of stock return moments in the less liquid Australian market. We initially find conflicting results. Characteristic exponent point estimates of approximately 1.5 are found for Australian stocks, in line with previous US research findings. This would imply that the population variance is infinite. On the other hand, Hill-estimates, are above 2 for all stocks indicating that second moments do exist. This conflicting result is resolved by setting up a simulation experiment in which we show that combinations of the Hill-estimate and the characteristic exponent, produced by the real data, are extremely unlikely for sum stables. These results provide further evidence for the existence of second moments. However, the determination of the existence of fourth moments still remains unresolved.
Keywords: Sum stable distributions, Hill-estimator, moments
JEL Classification: C14, C22, G12
Suggested Citation: Suggested Citation